Banks bury fees in the fine print
You may not even know these fees exist until you get stuck having to pay one of them.
This post comes from Jennifer Waters at partner site MarketWatch.
From mandatory-arbitration clauses that waive jury trials to fees on empty envelopes and cash deposits, your bank is keeping disclosures tied to your checking accounts heavily cloaked in fine print and sometimes not in any print at all.
"No one actually reads 65 pages of disclosures," says Susan Weinstock, the director of the Pew Charitable Trust's Safe Checking in the Electronic Age Project. "Fees get buried in there and people don't know about them."
The banking industry is fee-happy, with checking accounts alone subject to some 48 potential charges. Disclosures are rampant with what Weinstock calls a hodgepodge of wording and definitions that have left consumers confused and even bored by the fine print, some of which is in the tiniest of fonts.
Pew's mission is to convince banks to include for all checking accounts disclosure boxes similar, yet considerably longer, to those now found on credit card bills. But through its annual Safe Checking study, it has uncovered a number of items and fees that most consumers wouldn't have a clue about until they got hit with them. For example, don't forget to let the bank know when you've moved. You can be charged a fee if the bank gets mail it sent to you returned.
"These things need to be transparent so consumers know and can compare the fees and terms and conditions of the account that best meet their needs," Weinstock says.
Of course, not every bank is hiding fees, but you often won't be privy to the entire fee schedule until you're about to open the account, says Alex Matjanec, the co-founder of personal finance site MyBankTracker.com.
"And even then, some banks won't give you a schedule of fees but make you call customer service to find out about a fee because they're changing all the time," he says. "And then they charge you for talking to customer service."
Even if you do read through the reams of disclosures, most banks reserve the right to change the terms at any time. "You would hope that your bank would notify you when fees do change, but they don't all do that," Matjanec says.
Here's a rundown of what to look for:
- Mandatory-arbitration clause. This is a divide-and-conquer provision that prohibits customers from legally ganging up on banks, particularly through class-action lawsuits. Any disputes must be settled through an arbitration process in which the go-between is chosen by the industry.
- Posting order. Banks vary in how they order your debits and deposits. Some will do it based on the time posted; others on the amounts of the debits. Some choose to deduct larger debits first, which can make a huge difference in the number of overdrafts you might receive if your account is short.
- Early account closure fee. This didn't pop up at many banks until Bank Transfer Day in 2011 when masses of consumers revolted and dumped their banks in favor of smaller banks, credit unions or no bank at all. Now, a handful of banks slap $25 fees on accounts that are closed within 90 to 180 days after opening.
- Check-cashing fee for interlopers. Try to cash a check at a bank that you're not a customer of and you could get charged. Like a currency exchange, some banks will charge $5 for check cashing even if the check you're cashing is from that bank's customer.
- Empty-envelope fee. This is a crime-deterrent charge for those who put empty envelopes in an ATM as a deposit and then withdraw the "deposit" amount for quick cash. Banks don't usually catch the "mistake" until the envelope is opened. They'll charge you upward of $35 per event, even if it really was a slipup.
- Return-deposit fee. A check you deposited has been returned because of insufficient funds in the other account, so you get charged handling fees of $25 to $35 by your bank.
- Return-mail fee. Don't forget to include your bank in the pile of address change forms you send when you move. Banks will charge $3 to $15 if mail to you is returned to them.
- Inactivity fee. Many banks will charge you anywhere from $5 to $15 if your account has been dormant for six to 12 months.
- Coin-counting fee. Banks have counting machines that you pour your jars of accumulated loose change into for a tally that you can then deposit or take home in dollars. Now, many are expecting you to ante up $3 to $5 or more to run those coins through.
- Big-deposits fee. This falls under the cut-off-your-nose-to-spite-your-face variety. Deposit too much money and some banks will charge you to hold it, an expense that began hitting the very rich and corporations that were stockpiling cash during the depths of the recession.
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