Avoiding Unnecessary Fees
Stop paying common fees on credit cards, banking, travel, and phone service
Avoiding Unnecessary Fees
Mark Lund
"Flat rate" may seem to refer to the flat-on-your-back dead faint you experience when you read your monthly bills. Your apparent bargain phone plan skyrockets from $30 to $50, thanks to hidden fees. The late fees and other service charges you pay on your credit cards add about $13 billion a year to the banking industry’s bottom line. You may live in an era when it costs money just to get money at an ATM, but you don’t have to take it sitting down. On the following pages are strategies to help you avoid some of the most common ancillary fees associated with everything from credit cards to rental cars. It’s money-saving advice, with no hidden charges.
CREDIT CARDS
Late-Payment Fee
Why You’re Being Charged: Your credit-card company doesn’t care that the check is in the mail. If it’s not at the payment center by the due date — and usually by a certain time on that date (check the fine print of your billing statement) — you’re going to get slapped with a fee.
The Cost: $29 to $39. Also, nearly half of all major credit-card issuers now have a “universal default” feature, which means that late payments on one card can lead to a higher interest rate not only on that card but also on cards you have through other banks.
# How to Avoid It: Mail your payment (or pay online) as soon as your bill arrives, or at least five working days before the deadline. You can also ask your credit-card company to set up your own easy-to-remember deadline (the first of the month, for example). Or sign up for an automatic-payment plan.
# If you are late with a payment, call the company and ask if it will remove the charge as a courtesy. If you have a good payment record, the company may let you slide once.
Over-The-Limit Fee
Why You’re Being Charged: No buzzer sounded when you exceeded your credit limit; the cashier didn’t even ask you to pay with another card. “People think their bank will cut them off, but it won’t,” says Linda Sherry of the advocacy group Consumer Action.
The Cost: $29 to $39. And you’ll keep paying the fee, plus interest, every month your balance remains over your limit.
How to Avoid It: Know your balance. A 2002 study by the nonprofit consumer-education organization Myvesta found that 24 percent of people don’t even look over their credit-card bills each month. Bad move. If you’re between statements and contemplating a big purchase, first check your balance either online or with a toll-free call to the card company.
BANKING
Out-of-Network Fee
Why You’re Being Charged: Because you needed cash and used another bank’s ATM. Or because you have an account that limits the number of free transactions — including ATM withdrawals — that you can make each month, and you exceeded that.
The Cost: For using an out-of-network ATM, you’ll pay $1 to $2 to the bank that owns the ATM, plus up to $2 to your bank. Once you’re over your allotted transaction limit, banks charge 25 cents to $1 per transaction.
# How to Avoid It: Use machines at branches of your bank or its affiliates. Call your bank or check its web-site for a list of ATMs in your local network.
# Look for ATMs with a NO SURCHARGE HERE sign. They’re most often found at local credit unions and grocery stores.
# If you must use an ATM where you’ll be charged, at least get your money’s worth and take out more than $20.
Monthly Maintenance Fee
Why You’re Being Charged: Your account balance has slipped below the minimum your bank requires.
The Cost: About $11 a month for accounts that earn interest; about $4 for noninterest-bearing accounts.
How to Avoid It: Find a new bank. “No one should be paying these kinds of fees anymore,” says Myvesta spokesperson Michael Tehan. Most banks offer some kind of free checking account, with no minimum balance and no transaction charges. And many banks waive the monthly maintenance fee if you use direct deposit for your paycheck or do some other business with them, such as taking out an auto or home loan.
Insufficient-Funds Fees
Why You’re Being Charged: Even though you had a direct-deposit payment on the way, you didn’t have quite enough money in your account when you wrote that check for your car payment.
The Cost: Some banks offer “courtesy” over-draft protection, which means they’ll cover your bad checks for a fee of $10 to $35 per check. Many banks also charge $2 to $10 for each day your account remains overdrawn. If your bank doesn’t cover you and your check bounces, expect a returned-check fee of about $20 from the bank, plus a fee from the recipient of the bad check.
# How to Avoid It: Sign up for overdraft protection that taps into your savings account or debits a credit card if your checking account is overdrawn. Or apply for an overdraft line of credit, which will automatically lend you the funds to cover your checks or debit-card transactions, charging you interest (at 7.5 to 22 percent) or a daily fee ($3 to $10) until the loan is repaid. Some banks charge a nominal monthly or annual fee for this service as well. But as long as you repay the money quickly, you’ll come out ahead by avoiding hefty “bad check” fees and the embarrassment of bounced checks.
# Don’t count on lag time. Under Check 21, a federal law that went into effect on October 28, companies can cash your checks electronically — meaning money is taken from your account much more quickly than in the past.
TRAVEL
Airline Ticketing Fees
Why You’re Being Charged: The airlines say that printing paper tickets costs too much. If you opt for an old-fashioned paper ticket instead of an e-ticket, it will cost you.
The Cost: Paper-ticket fees vary by carrier. Northwest Airlines and American Airlines charge $50. Continental Airlines does, too, but will waive the fee for travel that requires a paper ticket (when going to certain foreign countries, for example). United Airlines charges $20.
How to Avoid It: Embrace the e-ticket, and use your printed confirmation as backup.
Rental-Car Insurance
Why You’re Being Charged: The rental agent scared you into buying coverage you probably don’t need.
The Cost: Prices vary by company, type of car, and the state you’re renting in but can total as much as $30 a day.
How to Avoid It: Find out if the liability and collision coverage on your own car applies when you’re driving a rental. It probably does, says Jeanne Salvatore of the Insurance Information Institute. (If you rent a luxury car, though, you may need to buy extra coverage.) Also, some credit-card issuers offer complimentary collision coverage for gold-and platinum-card holders who use their cards to pay for a rental. (Call your company for details.) Consider forgoing “medical payments” coverage if you have adequate health coverage. Your homeowner’s insurance may cover certain items stolen from the car, making “personal effects” coverage unnecessary.
Miscellaneous Hotel Fees
Why You’re Being Charged: Whether or not you actually used the hotel pool or the Internet access in your room, you may find a charge for them on your final bill. Fees and surcharges are expected to bring in $1.2 billion in revenue for the U.S. lodging industry in 2004.
The Cost: Fees vary, but these are typical examples: minibar-restocking fee, $2 to $3.50 on top of the food or drink price; gym and pool charges, $8 to $24 a day; parking fee, up to $72 a day; housekeeping surcharge, $6 to $20 a day; Internet-access fee, typically $10 a day.
How to Avoid Them: Ask about additional charges when you check in; at checkout get a detailed breakdown of your bill. If there are fees that haven’t been clearly disclosed, it is fair to question the charges. But be prepared: Hotel employees are trained to answer questions and complaints about fees, says Bjorn Hanson, a lodging analyst with the investment firm PricewaterhouseCoopers. “They know how to say no.”
CELL PHONE
Roaming Charges
Why You’re Being Charged: You see that “roaming” signal on your cell-phone screen but fail to consider how much it’s going to cost you to make a call outside your plan’s network area.
The Cost: From 50 to 80 cents a minute.
How to Avoid Them: Call the cell-phone company and upgrade your plan. “If you travel and use your cell phone, you have no business paying roaming fees in today’s market,” says Michael Shames of the Utility Consumers’ Action Network, a San Diego-based consumer-protection group. Most companies are phasing out regional plans in favor of national plans with no roaming charges. (Be aware: Upgrading to a national plan may force you to lock in to a new contract.) If you choose to stick with a plan that charges roaming fees, make sure you understand the boundaries of your network calling area, and plan your calls accordingly.
HOME PHONE
Long-Distance Service Fee
Why You’re Being Charged: Even if you don’t make a single long-distance call, many big long-distance carriers — including AT&T, Sprint, and MCI — charge a flat monthly fee simply for the privilege of having them as your provider.
The Cost: From $3 to $6 a month, depending on the carrier and the service.
How to Avoid It: Shop around for a lowcost long-distance provider with no monthly charge. The website SaveOnPhone.com ranks and compares more than 350 long-distance carriers in terms of fees, per-minute cost, customer-service wait, and other criteria. Alternatively, cancel your long-distance service and buy a prepaid calling card.
Written by John Fried
December 2004/January 2005
www.realsimple.com
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