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If you’re like most people, you probably don’t conduct a lot of research when you open a bank account. Most likely, you go with a bank that’s close to your home or work, is a big national name that you think you can trust, or do business with them because they’re giving out a free toaster (or whatever incentives they use these days.) After all, banks are all the same, right? Wrong. In fact, most banks are making money hand over fist off their clientele with fees, often undisclosed or confusing, at best. To understand how banks operate in the first place, consider the fact that most banks offer zero or miniscule interest to customers on their common financial products, like savings and checking accounts. Some only offer 0.01 percent just to say they offer interest-bearing accounts, while even the “good” financial institutions with favorable interest offer around 1 percent, not even up to par with inflation over time. So once customers open up accounts with them to park their money, the banks basically use that same money to lend out to others (or even you!) at higher interest rates. Of course it’s a little more complex than that, but in theory, they can get 100 customers to open checking accounts with zero interest paid and then use the money to lend to someone else on a 5 percent mortgage. Ingenious, huh? Well banks and moneylenders have been doing that since the beginning of time. But over the last forty years or so, the banking industry has devised treacherous new ways to make even more money off of their customers with a plethora of fees. Basically, they’re trying to tax you for the privilege of giving them your money, which they’ll use to make more money. Doesn’t seem fair, does it? In fact, they’re quite egregious and even blatant about trying to snag you, their loyal customer, with as many fees as possible. Studies reveal that the average checking account has 30 fees built into the small print, and some charge as many as 50 such fees! Bank of America, one of the worst offenders, racks up $1 million a year per branch just in customer fees!
Of course banks have a right to generate money, just like any business or individual, but the problem stems from the fact that customers rarely understand those fees, if they’re disclosed at all.Research by financial watch dog groups concludes that “fewer than half (48%) of major banks had well-marked, direct links from their checking account product pages to a full summary of fees” and that “one-fifth of U.S. banks still don’t provide a list of these charges before a customer submits an online application.” Less than half of all major banks surveyed disclose fully disclose their fees to customer, even after they were requested, and 12 percent provide no information about fees at all. Of all major banks, Capital One was the only one to earn perfect scores for transparency, while Bank of America, Wells Fargo, USAA Federal Savings Bank, and HSBC are some of the banks rated worst for charging frivolous fees. And while there are increasing calls for full bank transparency when opening accounts and increased regulation by the Consumer Financial Protection Bureau, among others, to protect consumers, for now, its caveat emptor. But the good news is that a new swell of banks, often branch-free banks, e-banks or smaller credit unions are challenging the notion of barraging customers with fees, and even pay reasonable interest rates on their financial products. Here are the most common fees to watch out for: Monthly checking fees: Overdraft fees: Bounced check fees: ATM surcharges: Online fees: |
