Grant Baldwin’s Blog

I came across a good post recently from Bargaineering via The Consumerist blog about some common bank fees that need to be avoided.  Here are the big three with a brief explanation and my 2 cents on how to avoid them in the future…

1. Overdraft Charges – You get this charge when you spend more than you have in your bank account.  So if you have a balance in your account of $100, and you make a purchase on your debit card for $150, you can expect to get drilled with an overdraft charge.  In my opinion, this is a great fee, because at some point you’re going to get tired of paying it and you’ll stop spending more than you make!  Brilliant!

• Avoid This Fee: Pay Attention.  If you live off a written budget, you should always be safe, but you still need to keep an eye on things.  I check our accounts online every few days, just to make sure everything is going where it is supposed to go.

2. Minimum Balance Requirements - Some accounts require that you maintain a certain balance level, such as say $100.  So if your account were to hit $99, you would be handed a fee.

• Avoid This Fee: Talk to your bank and make sure you don’t have this requirement on your account.  If you do, there are plenty more options out there, and you should probably explore a different type of account or a different bank altogether.

3. Non-Network ATM Fees - Banks will allow you to make transactions from their ATMs, but if you use someone else’s ATM, you’re going to pay for it.  For example, if you have an account with Bank of America, you can use any of their ATMs for free but if you use a Wells Fargo ATM to make a transaction, you’ll pay for that privilege.

• Avoid This Fee: Use the envelope system.  I’ve talked about this before, but my wife and I pay for a lot of things in cash…we just plan for what those purchases will be and use an ATM with our bank to avoid fees.  ATMs are dangerous, because they can seem like quick-access piggy banks, but only use ATMs to get cash for planned purchases, not spur-of-the-moment buys.

One other great point from this article, that I completely agree with, is that if you ever do have a fee, ask for it to be refunded.  If you’re a good customer and especially if this is your first fee, call up the bank, act super nice, and see what happens.  It never hurts to ask.  In the past, I’ve done this and on several occasions have gotten fees taken off my account.

This was from a good article on Yahoo recently about 7 Credit Myths that exist in our economy.  Here is a list of the 7 myths as well as my commentary…

1. Writing ‘See ID’ on the signature line on the back of your cards will stop someone else from using your card – Clerks, restaurant servers, and cashiers used to be monsters on checking IDs when this was first an issue several years ago.  The key phrase: “used to be.”  Think about this in your own world.  When was the last time someone checked your ID?  I couldn’t tell you the last time it happened to me.  And they probably wouldn’t check the ID of someone who stole your card either.
2. There’s no credit limit on your American Express, so you can buy anything you want – Survey says…WRONG!  If you have an American Express card, you are allowed spending up to a certain limit based on a variety of factors including spending patterns, credit history, etc.  Basically, if your application says you make $35,000 a year and you just charged $5,000 for new clothes, they are going to be a little concerned and call to talk to you.
3. You need one of each of the big cards – Visa, Mastercard, Discover – because you may get stuck someplace that accepts one and not the other – Let’s be realistic…99% of the places you and I shop at are going to accept any three of these options.  By carrying around all 3 just for that 1% of the time, you are further complicating things financially by having an extra set of cards to keep up with. 
4. You can give your credit score a boost by paying more than you owe – Why would you even want to?  If you are looking to give extra money to your credit card company, then just give it to me instead!  Although it technically does give your credit score a slight boost, it is a temporary and artificial boost, so it really doesn’t provide you any long term value. 
5. Using your debit card wisely can help your credit score – Although a debit card and a credit card look identical, they act completely different when it comes to your credit score.  A credit score is based on debt, so because using your debit card doesn’t incur any debt, it wouldn’t affect your credit score in any way. 
6. Retailers can set a minimum amount you can charge on a credit card when you buy something from them – You’ve probably seen signs like this at gas stations or small convenience stores: “$5 minimum for credit card purchases.”  The reason for this is because every time a business accepts your debit or credit card, the credit card company charges them a fee for that service.  So if you charge a $.50 Snickers to your credit card, they may actually be losing money on that transaction after their fees are paid.  In order to make it worth their while, they put signs up like this one.  But technically, they are not allowed to do that.  They have to accept any amount including a charge for 1 cent.  My take…if you are charging a $.50 Snickers on your credit card, you’ve got bigger financial issues to deal with!
7. If you go over your credit limit and pay it back before the due date, you’ll be fine – Nobody wants their card to be declined because of “insufficient funds,” so if you’re over the limit by a few bucks, most credit card companies will go ahead and authorize the purchase.  However, you’ve created two problems for yourself when you go over your limit: 1) you’ve given them a reason to jack up your interest rate, sometimes to over 30% and 2) they will drill you with a “gotcha” fee that will probably be in the neighborhood of $30.  Is your over-the-limit purchase really worth that?