Wallet Watch

Amount Americans pay every year to banks in fees on checking accounts: $36 million. The Charlotte Observer ran an excellent story about overdraft fees and the numerous other fees associated with bank accounts.  

http://www.charlotte.com/business/story/528936.html

Banks relying more on fees for income

They’re banking on you to pay up

CHRISTINA REXRODE

crexrode@charlotteobserver.com

Add this to the list of things that are getting more expensive: penalties that banks charge you for breaking their rules.

Charges like overdraft fees, stop-payment fees, and ATM surcharges are on the rise, according to a report released last week by the U.S. Government Accountability Office. And that’s not all: The report also says that financial institutions are increasingly relying on such charges to supplement income.

The GAO undertook the study because lawmakers thought consumers might be unaware of the fees they were shelling out on their checking and savings accounts — more than $36 billion in 2006.

The GAO alleges that banks aren’t always making information about their fees readily available to potential customers or on their Web sites; federal banking regulators have said they’ll look into the matter. The banks say that the fees enable them to offer more services to customers; they also point out that the fees are largely avoidable.

That’s cold comfort to consumers like Lori Irvin, a 31-year-old Charlotte resident. She was charged for stopping payment on a check she’d written for some mail-order products that turned out to be faulty. “If you’ve got a stop payment, it’s probably because someone has gotten a hold of your check who shouldn’t have, or someone’s done a disservice to you,” Irvin said. “And then you have to pay $25 to stop your own check?”

According to one measure cited in the federal report, the average stop-payment fee in 2007 was $19.41, a 17 percent increase since 2000, after adjusting for inflation. Overdraft fees increased 11 percent to $23.13, and the charge for returning a deposited item, which happens when you deposit a check that bounces, increased 49 percent to $12.31.

The fee that banks charge their customers for using other banks’ ATMs actually declined, from an average of 92 cents to 69 cents. But Randall Bevan, a Charlotte resident and a customer of BB&T Corp., is irked that it even exists. He was in Philadelphia recently for business and needed cash. BB&T, based in Winston-Salem, has more than 2,000 ATMs, but none are in Pennsylvania. So Bevan, who works in medical sales, used an ATM operated by PNC Bank.

PNC didn’t charge him for the transaction, but BB&T charged him $2, said Bevan, 40.

“I thought that was pretty lame on BB&T’s part,” Bevan said. “It’s not a lot of money. It’s more the principle of the thing.”

What the banks say

BB&T says it is simply passing along the charges: When its customers use other banks’ ATMs, BB&T has to pay a fee to an ATM operating network. Also, four of BB&T’s checking accounts, including its student checking, let users make a certain number of withdrawals each month from foreign ATMs free of charge.”We want customers to avoid those fees, and they can,” said spokesman Bob Denham. “Our hope would be for the client who was hit with the fee to visit one of our branches because somewhere in those four accounts he should be able to qualify, and he won’t have to worry about those fees.”

The American Bankers Association says those fees allow banks to invest in better services for customers. “Sometimes it’s a misnomer to look at these simple stories about fees, because the level of services has gone up,” said Bob Davis, executive vice president of the American Bankers Association.

Besides, some consumer fees have decreased, as the banks point out. The same study in the GAO report found that the fees for some transactions — including ATM annual fees and overdraft transfers linked to a deposit account — had decreased.

Finally, the banks point out that most consumer fees are avoidable. Bank of America spokeswoman Diane Wagner emphasized that the bank launched a campaign last June to teach customers how to avoid charges like overdraft fees. On its Web site and in other literature, the bank outlines tips like setting up e-mail or cell phone alerts for when your account drops below a certain balance.

“We would be delighted if our customers had a positive in their account rather than a negative, and we want them to experience zero overdraft by having materials such as fee education available to them,” Wagner said.

Next month, Bank of America will raise the charge for an overdraft or returned item from $20 to $25.

– Christina Rexrode: 704-358-5170

How to avoid fees

If you’re careful, you can avoid the fees that banks will charge you for breaking their rules. Here are some suggestions on how:

• Only withdraw cash from your own bank’s ATMs. If you can’t get to one of your own bank’s ATMs, get cash by using your debit card at a grocery store, drugstore or discount retailer and choosing the “cash back” option. If your bank doesn’t have many ATMs near you, consider switching banks.

• Keep track of the balance in your checking account by immediately recording every transaction. Also, check with your bank about getting a text message or e-mail every time your account drops below a certain balance.

• Sign up for overdraft protection. You can link your checking account to your savings account or a credit card so you won’t be charged if you spend more than your checking account holds.

Average fees rising

Insufficient funds

$24.18

11 percent increase

Overdraft

$23.13

11 percent increase

Returns of deposited items

$12.31

49 percent increase

$19.41

Stop payment order

17 percent increase

– Source: Government Accountability Office. Fees are adjusted for inflation and reported in 2006 dollars.

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