Life can get crazy sometimes and that craziness can lead to finances getting lost in the shuffle. Our bank and credit card accounts can carry hefty fees for failing to meet our obligations as bank customers and ensuring that accounts are properly funded. Here's what you can do when life has got the best of you, and your accounts are not as healthy as they could be.
Checking Account Over Draft Fees
For starters, if you find yourself over drafting your account ask why. If you are frequently over drafting you probably have a budgeting issue. Consider a budgeting tool like Mint to help you track your funds or use a prepaid card to manage your spending. If it's a one off deal, and you haven't over drafted before, just give your banker a call and explain the situation. There's a good chance they'll reverse the charge, you just need to get over your telephonophobia. You also have three tools available to you at your existing bank to help avoid this pitfall.
- Ask your bank to remove overdraft protection. This will mean your card gets declined if you swipe and have insufficient funds. It's not convenient, but it will help you avoid a costly fee.
- Link a savings account. Most banks will allow you to link a savings account and pull any money from your savings to cover an overdraft balance. Be careful here. If you find yourself constantly digging into your savings you may be doing yourself long term harm.
- Open a line of credit to cover any overdrafts. Using this method, you'll have an emergency line of credit opened and attached to your checking account. If you overdraft, you'll pay interest on the balance the bank has to lend you to cover the difference, but this is often a better deal than getting slammed with an overdraft fee.
Credit Card Late Payment Fees
Missing a credit card payment can have a major long term impact to your finances. It's very important to pay at least the minimum payment on your credit card each month. If you find yourself missing payments consistently, go back to your budget and see where you can make changes. If it's a one off deal, you guessed it, pick up the phone and explain the situation to see if you can get that fee reversed. Always know your card terms so you are aware of the fees that can be levied on your account.
- Failing to pay your bill on time will be reported to the credit bureaus and can negatively impact your credit score for up-to 7 years.
- If you are over 60 days late on your payment, banks can implement a penalty APR. Rates are often as high as 29.99%. Increasing your rate from an average of 16% to 29.99% would cost you an extra $300 over time on a $1,000 balance.
- Late fees. A late payment can result in a late payment fee of between $25 - $35.
Credit Card Over Limit Fees
Over limit fees used to be a common occurrence before the Card Act of 2009, costing consumers upwards of a billion dollars a year for going over their pre-set credit limit. The Card Act requires that customers opt-in to allow their card to charge amounts that are over their credit line. If you don't opt-in, your card will simply be declined. If you do opt-in to the service, you could be looking at fees in the $25 ballpark for going over your limit. If you find yourself needing more credit than you have access to, ask yourself what is driving the need for more credit. If you're paying your balances off each month and your current limit doesn't match your spending habits, ask your bank for a credit line increase. Some banks can even increase your line without doing a hard credit pull. If you're at the top of your credit line and are carrying a balance, let's go back to budgeting to get your finances back on track.
Credit Card Returned Payment Fees
This is another fee that can range from $25 - $35. These are rare with the birth of online payments, but if you're writing a check, do your best to make sure it doesn't bounce. Sending a bad payment could result in a returned payment fee on top of your late payment fee.
A Penny for our Thoughts:
Fees are no good. If you find yourself in a situation where you are constantly paying fees, try to identify the source of your financial woes and address the issue. Constantly paying fees will keep you from saving and ultimately from your long term financial goals. If you made a one time mistake, a little sorry will go a long way.