Unnecessary costs can accumulate quickly and could significantly drain your finances if not kept in check. A recent study by FeeX.com, a platform specializing in fee analysis, revealed that Americans, on average, spend around $155,000 on pointless fees throughout their lifetime. Most of these fees are imposed by banks, investment firms, and other financial bodies.
The idea of spending an amount that could buy a house on charges may seem shocking. Given the sheer number of fees associated with monetary transactions today, however, it’s easy to see how these can pile up. For better money management, let’s review 10 frequent fees and discuss how to avoid them.
1. Late Payments
Late payment charges don’t only strain your budget, but they can also harm your credit score. Fees for late credit card payments can go above $35 and also increase you to the “penalty APR” of nearly 30 percent. If late fees have become a recurring issue for you, it’s time to inspect your budget and cut out non-essential items. If your paycheck does not cover your expenses, consider starting a side job for additional income and staying ahead with payments.
2. Overdraft
Forgetting a pending transaction and carelessly using your debit card can easily plunge your account into overdraft. Although unpleasant, there are ways to avoid this. While overdraft protection might seem like a useful solution, banks usually charge a fee for using it. A better idea could be downloading your bank’s mobile app to monitor your balance and transactions in real time. Alternatively, consider opting out of overdraft altogether, prompting your card to be declined if you lack sufficient funds.
3. ATM
Avoid paying ATM fees at all costs. If you need cash but your bank’s ATM is out of reach, make a small purchase at a nearby grocery store, gas station, or retail and withdraw cash at the counter. Since a hasty ATM visit stems from impulse buys or inadequate planning, ensure you genuinely require cash.
4. Checking Account
Bankrate’s annual checking survey shows that in 2013, only 38 percent of major banks provided free checking. Moreover, the average fee increased from less than $2 per month in 2009 to over $5 per month in 2013. If these fees are cutting into your budget, consider moving your checking account to a local credit union. More than three quarters of the 50 major U.S. credit unions provide free checking and often offer lesser-interest loans and better customer service.
5. Early Termination
Companies like gyms and wireless carriers infamously charge early termination fees to discourage contract cancellations. Due to the resistance of consumers towards obligatory services, numerous no-contract alternatives are available. For a no-contract wireless plan, T-Mobile is worth considering, but smaller services like Ting and PagePlus should not be overlooked, the former uses Sprint’s network, while the latter is preferable for Verizon Wireless network users.
6. Shipping
While ‘free shipping’ is frequently promoted, real free shipping is less prevalent. Most companies offer free shipping with a minimum purchase requirement, potentially leading to overspending or delivery fees. To avoid these costs, look for promotional codes from websites like CouponSherpa.com, or refrain from ordering until holiday sales. By waiting, you might secure a discount and free shipping.
7. Restocking
Various retailers impose a restocking fee on returned items they cannot sell as “new.” For instance, Target levies a 15-percent fee for returned digital cameras, portable DVD players and similar electronics. Crate and Barrel might also charge restocking fees on returned furniture. Prioritize reading the fine print on return policies and ideally, shop at venues that don’t implement these fees, or research thoroughly before buying to minimize return need.
8. Credit Card Interest
The National Federation of Credit Counseling estimates that a person charging $1,000 to his credit card (with an APR of 18 percent), making minimum repayments, can take up to 12 years to pay off the balance. The key to avoiding these fees is settling your balance monthly. Setting up alerts for email or text bill reminders can be useful. If you can’t cover your balance, switch to cash and concentrate on clearing your credit card debt.
9. Foreign Transactions
Using your credit card overseas can attract foreign transaction fees of 2 to 3 percent per purchase. Depending on your spending or frequency of travel, it could be worthwhile to choose a credit card with no foreign transaction charges. Alternatively, you can withdraw cash for use during your trip, but you should check with your bank if they offer the necessary foreign currency.
10. Convenience
“Comfort charges” for items like show tickets, toll dues, or vehicle registration bills have become commonplace. Though ironically named, these fees are often unavoidable. If a bill or invoice includes a convenience fee for online payment, I personally prefer sending a check! When it comes to show tickets, third-party providers might offset their convenience fees by offering lower ticket prices.
Andrea Woroch, a recognized expert on consumer and money-saving strategies at Kinoli Inc., enables consumers to manage their expenditures without substantial lifestyle adjustments. Offering prudent spending insights and personal finance guidance, Andrea transforms everyday consumers into clever, cost-conscious shoppers. Her advice has featured prominently in leading news forums such as Good Morning America, NBC’s Today, MSNBC, New York Times, Kiplinger Personal Finance, CNNMoney and several others. Follow her on Twitter for daily savings tips and advice.
For any media inquiries, please reach out to Andrea Woroch at 970-672-6085 or via email at andrea@kinoliinc.com.
