What I’ve Been Up To

This Week in Your Wallet: October 4, 2011

It’s all anyone seems to be talking about these days, so I’m sure you’ve heard:

Last week, Bank of America announced it will start charging a $5 monthly fee to basic checking consumers who use debit cards.  The fees will begin early next year.  They’re not the only one.  SunTrust began charging a $5 debit fee earlier this summer. Chase and Wells Fargo are testing $3 fees.

And debit card fees are just the tip of the iceberg.  According to Bankrate.com’s annual checking account survey, the average fee for using an ATM at a bank other than your own is $2.40.  The average fee for bouncing a check is now $30.83.  And the average monthly fee for checking accounts is on the rise as well.

Why is this happening?  First, the CARD act put a crimp in the $35 billion banks were earning annually from overdraft fees.  And then on October 1, another piece of legislation went into effect.  It limits the amount banks can charge retailers who swipe your debit card (called an interchange fee) in half.  That’s estimated to cost the banks another $6 billion.  They’re looking for ways to make that revenue up.

In the face of this news, it’s easy to feel nickel-and-dimed — I know I do! But there are a few things you can do to limit the effect on your wallet:

• Find a way around the fees.  Often you can eliminate monthly checking account fees by opting to bank or receive statements online, or maintaining a minimum balance in checking combined with other accounts — $1500 to $2500 used to do the trick, but I got a letter from Citi regarding an account of mine that it was now $6,000.   That’s tough for many people to do these days, but make sure you at least read the correspondence you’re getting from your bank so you know where these limits are.  Bank of America has also said the debit fees will not apply to customers with “premium accounts.”  These premium accounts include two linked savings and one checking account.  It has a $25 monthly maintenance fee which you can avoid by maintaining a $20,000 minimum balance or having a mortgage with them.

• Consider a smaller bank or credit union. There is one important footnote to the Durbin Amendment: Institutions with less than $10 billion in assets are exempt.  That means small banks and credit unions may be a good option if you decide switching is worth the trouble.  They likely won’t be charging for debit card use because they’re not bearing the brunt themselves.   Just make sure the ATM network is convenient for you – a few out-of-network ATM charges could more than wipe away any savings you realized by switching banks.

• Or, think about an online bank. These accounts are attractive – they are generally free, most don’t charge ATM fees (and many reimburse you for the charges imposed by other banks) and some even pay you interest. But not everyone is a good candidate. An online bank will work for you if you’re tech savvy and can get by without talking to a bank rep or teller.  If you prefer to actually go to the bank or want to be able to have a face-to-face, this is not an option for you.  If you think you can cut it, there are a couple good options: Ally Bank has free checking, no minimum balance, no ATM fees, and at press time, was paying .5% interest on balances of $15,000 or less.  Charles Schwab has a similar account that pays .2% interest, though it must be linked with a brokerage account (also free).  And Perkstreet.com offers free ATM access in addition to 2% back on debit card usage.

• Finally – you may want to go back to using a credit card.  They’re not for everyone.  But if you can pay off the balance every month AND keep your spending in check, rewards are getting better precisely because the new amendment doesn’t apply to credit cards.  If you don’t use the aforementioned credit card wisely, the banks could actually end up making out significantly better than expected as this article in CNN Money points out.   The story says that instead of switching banks, many people will, as I suggested above, dust off their credit cards and start using them again. Making the switch back to credit will provide a boost for banks, as they make more money from credit in the long run. So stay tuned — over the next few months we’ll see if consumers punish Bank of America by leaving altogether, or reward them (inadvertently) by making the switch to credit.

Spotting the Spam in Online Reviews

How many of you, when booking a restaurant on OpenTable or a hotel through TripAdvisor, read the user reviews in order to determine if the product is actually worth your money? I do — all the time. Which is why this article in Bloomberg Businessweek caught my attention: As many as 30% of online user reviews are fakes.

Companies will pay spammers to inundate review sites like Yelp, Google Places and CitySearch with good reviews and “buzz words” that will help place the company higher up on Google search results. Luckily, these sites are catching on and hiring researchers to study the semantics and spot the cues that indicate a fake post. Among their findings: Truthful reviews talk about the actual product, using specific nouns and adjectives. Spammers, having not been to the hotel or restaurant, talk about themselves, and use vague pronouns (“it” instead of “the queen-sized room”) or flowery adverbs.

Do you think you know how to spot the spam in reviews? You can test yourself here — Businessweek provides three real reviews and three fake reviews, and you have to determine which is which.  Answers are at the bottom of that page.

Have a great week!

Jean