Posted: July 20, 2009
Bank fees: The hidden, the obvious and the concerns
What the Credit Card Bill of Rights means for youBy Michele Falivene
Did you ever hear the adage, “Take care of the pennies and the dollars will take care of themselves?” It’s time to apply this thinking to our day-to-day banking. Sound simple? It is.
The Credit Card Bill of Rights was passed in May, but the changes won’t go into effect until February 2010. The bill was created to protect consumers from credit card companies raising rates and charging absurdly high late fees. Because the new bill has been passed, bank fees are estimated to go up as much as 50 percent as banks look to make up for the loss of income they usually receive from credit cards.
But even though the fees may be inevitable at some institutions, there are ways for both the consumer and business owner to protect themselves from the increasing, and often hidden, bank fees.
Protecting the consumer
For many reasons, especially the recent development whereby the new Credit Card Bill of Rights was signed into law, banks will have to change their practices regarding the fees they charge, hence we have to be more conscientious and more attentive to what will come out of our own pocket. If the bank will earn less on credit card-related fees, they will look to incorporate other types of fees to offset this loss.
In theory, this should motivate consumers to make changes now, by consolidating credit card debt and evaluating their current payment-and-fee situations. Consumer advocates report there are up to 250 common banking fees that will begin cropping up for many customers. Some of the most significant fees consumers should be aware of include:
Minimum balance fees
FDIC insurance fees
Incoming wire fees
How do you protect yourself from these new spikes in fees? By asking questions, shopping around and regularly reviewing all bank and credit card statements for correct charges, and of course, new fees.
Consumers should ask their banker about these fees and be fully aware of the complete schedule of fees, which must be made available upon request. They should also consider the benefits of doing business with a local community bank, which often charge significantly fewer fees than large, national chain banks. The more you do business with one local bank, the more advantages you’ll have for multiple products and services, because they know you and want your long-term business. By comparing your bank’s fees and options to others’, you can avoid surprises and minimize fees.
Small businesses are also in a position to gain if they manage their money better. Often times, small businesses manage their cash flow much like a consumer. Conversely, large corporate businesses have sophisticated “cash-management” or “treasury-management” relationships whereby they use analysis statements that define down to the penny what charges they incur for their daily functions. These can be complicated and very expensive. Neither of these approaches is ideal for small - and medium-sized businesses. I suggest that every business take the time to revisit their own policies and procedures and talk to their banker to gain insight into current concerns and opportunities that can directly help position their cash, decrease expenses and increase security.
The best approach is to negotiate the relationship prior to incurring fees and requesting waivers. This is easily done when working with community banks. Large banks are standardizing their fees, and rarely do the call center representatives have the authority to waive fees or make any decisions based on your business’ custom needs.
Community banks and fees
A community banker is more likely to establish a personal relationship with their clients and personalize each interaction. They know who you are and they value the relationship. This means they will truly help you to do what’s right and reasonable for you and your business.
Many community banks will waive ATM fees, per-item charges and offer free fraud protection, whereby large banks often will have “standard” charges for all of these services. They have an objective of offsetting national advertising costs and branch-banking overhead, plus the impending loss of credit card fees and operate-under directives to collect fees from customers.
Consumers and business owners who establish relationships with their banker and discuss banking strategies in advance are more likely to avoid unnecessary fees and instead benefit from better money management practices.
It matters first who you’re banking with, and second, whether your products and services are the right fit for your cash management circumstances and your overall banking needs.
Michele Falivene is senior vice president of First American State Bank in Greenwood Village.