This Week in Your Wallet: Avoid, Reduce and Get Out of Paying These Fees
I was in an airport over the weekend and I broke one of my own money rules. I used an ATM in a place without an easy exit. I paid for it, of course. It cost me $2 to use the machine itself and my bank charges $2.50, so the transaction cost me $4.50 for access to my own money.
Ouch. Turns out that’s about average, according to a new Bankrate survey. The average amount that banks charge people who are not their customers to use their machines is now $2.77 (up 6.5% from last year, and the 10th year in a row that the cost has gone up). The average amount banks charge their own customers for going outside their own network is $1.58 (up 5% from last year). Combined: Using a machine that’s not your bank’s costs $4.35 a pop.
That’s not the only fee that’s gone up. Overdraft fees (also called nonsufficient funds fees) are now an average $32.74.
The silver lining in this story? Both of these increases can be attributed to the fact that consumers have gotten savvier about their banking behavior, according to Greg McBride, Chief Financial Analyst at Bankrate. Consumers are using fewer ATMs that don’t belong to their banks, so banks are hiking fees to make up the difference. Similarly, many consumers have not opted into overdraft protection. (A 2010 Federal Reserve rule no longer allows banks to charge overdraft protection fees unless a consumer opts in. My advice: Don’t.)
So what can you do if you find yourself paying more in fees than you’d like? First, make sure you’re banking at a place that’s convenient for you. Consistently using another bank’s ATM is a signal that you should think about making a change. Also, consider using your debit card to grab cash when you’re making a purchase – that can eliminate a trip to the ATM entirely.
And now for the other news of the week.
Ask and you might receive
It happens to the best of us. The bill gets shuffled in with the newspapers – or the calendar reminder gets snoozed – and before you know it, you’re getting charged with a late fee for an overdue credit card bill. Once you pay your bill, try asking your issuer to waive the fee. According to a new CreditCards.com report, asking your issuer to forgive the fee works 86 percent of the time. You can ask for lower interest rates, too. Two-thirds of the people surveyed successfully got their rates reduced after asking.
Matt Schulz, CreditCards.com’s senior industry analyst, says your approach with each call should differ. With a late payment, it’s pretty straightforward: if you don’t have a history and it’s a one-time slip, then you call to say you’ve paid the bill and state why the late fee should be forgiven (i.e. it’s your first late payment ever). For reducing your APR, it’s best to call with ammunition. “Have a feel for what your credit is, Schulz says. “You don’t need to know your exact score, but it helps to have a feel if you have good or excellent credit. Also, it can help to have some other offers you’ve received and say, ‘Hey, I’ve been offered these really good rates and I’ve been a good customer…” For more guidance on how to phrase your pitch, CreditCards.com has scripts ready to use.
Do know that not everyone gets the green light. Not only will your payment history and credit affect your chances, but also your income and age. Higher-income households were more likely to receive lower interest rates and late fee waivers, according to the report. Moreover, only 33 percent of teens and twentysomethings’ had success, compared with 59 percent 30-49 year-olds and 79 percent of 50-64 year-olds.
But the most important piece of information: not many Americans even bother to ask. The report found that only 28 percent of U.S. cardholders have asked to get a late fee waived, and just 23 percent for lower interest rates. You could be missing out on opportunities to save. “When you’re talking about an APR, the average rate for a new credit card is about 15 percent. If you have an 18-19 percent APR credit card – and you have good credit – the closer you can get your rate to the national average, the more money you can save.”
Dodge these spending traps
What might seem like a simple grocery run (or shopping errand) to you is an opportunity for marketers, sales professionals and CEOs to get inside both your head and wallet. Last year they spent $60 billion worldwide on market research and business intelligence aimed to get you spending more. They know what you buy, when you buy and which displays are more effective for grabbing your attention. Knowing this, DailyFinance outlines 10 store gimmicks to lookout for so that you can one up the big guys. For example:
- Free shipping. “FREE shipping when you spend $50 or more!” I see this one all of the time. Retailers are well aware of our aversion to shipping costs, which is why some sites offer it for free…with a catch, of course. Generally you have to spend X amount of dollars to qualify for it. So if you’re at $45 dollars and need to spend $50, then retailers are hoping you’ll shop more. And sure, sometimes it might be worth it, but other times, you’ll likely spend more than you would have had you just paid for the shipping in the first place. Always run the numbers!
- BOGO. If you’ve ever shopped at Payless, then I’m sure you’re familiar with this one. But many other stores are employing it as well. Why? Because it works. The buy-one-get-one-free sale can definitely save you money if you’re planning to make a purchase and the second one is free. However, if you’re swayed by the idea of getting something for free and find yourself justifying buying something you weren’t going to, then this marketing maneuver is getting the best of you.
- Charm pricing. It’s not $20 – it’s $19.99. Research shows we think the $19.99 price tag is a better deal. Other psychological pricing tricks to look out for are price tags without the dollar signs ($$) and ones with small print. Each one is likely to lead you further down the rabbit hole.
For more gimmicks, head here.
Have a great week,
Jean
