Fees! We hate them as much as you do. And not just because all of that nickel-and-diming adds up to a pretty penny. It’s also because they can be hard to escape. Consumers pay $2.4 billion per year in credit-card late fees—and $800 million in expedited-payment fees to avoid those late charges. We cough up $31 billion annually in debit-card overdraft fees. That’s a lot of $30-a-pop penalties for payments that banks authorized in the first place.
Airlines fees can be just as bad. Spirit Airlines, for example, ropes you in with its claim of “ultra-low fares,” then gouges you for $90 to check your first bag at the airport, $110 for the second, and $100 per carry-on (round-trip).
Still, many fees can be avoided or minimized. Here’s a guide:
Banks often give you an escape hatch, so use it to save. Avoid ATM withdrawal fees, usually $2 to $3, by using your own bank’s machines or fee-free ATM network. Or tap the cash-back feature many supermarkets offer when you pay by debit card. Stamp out those $25 to $35 overdraft fees by monitoring balances with a smart-phone banking app, signing up for e-mail alerts that tell you when your balance is low, and opting out of overdraft protection plans, which set you up to overdraw.
Avoid big-bank checking fees of $8 to $15 per month by signing up for direct deposit, maintaining minimum balances, or switching to a credit union, community bank, or branchless online or smart-phone virtual bank, where free checking is more common. And axe your bank’s $75 check-printing fee by paying more bills electronically and by buying the same 500 checks from Costco for just $12 to $14.
It’s easy to avoid $65 to $495 in credit-card annual fees because only 5 percent of credit cards have them; shop for no-fee, low-interest-rate options at bankrate.com. Stop overlimit fees by contacting your card issuer to opt out of plans that let you charge beyond your credit limit.
Knowing your consumer rights is the key to fee-zapping here. There’s almost no need to pay $12 to $17 in credit-report fees, because you can get a free copy once per year from each of the three big credit bureaus—Equifax, Experian, and TransUnion—at annualcreditreport.com. Some states allow a second free report, and you can get additional free reports by filing a fraud alert with a credit bureau every 90 days and asking for one.
Never pay credit-score fees, usually $8 to $20, because the “educational scores” you get are not the ones that lenders really use. FICO, the scoring company, recently began making the scores that it actually uses available without charge to customers of participating credit-card issuers, including Discover, Barclays, and First National Bank of Omaha.
You can deal with a variety of mortgage fees by asking the lender to explain them, then negotiating to reduce or eliminate them. Those include prepayment fees, origination fee, and various document fees. And if you forgot to pay a mortgage or credit-card bill that’s due tomorrow, avoid a late-payment fee of up to $50 and reduce expedited-payment fees as high as $25 by dashing to Walmart for its $1.50 next-day payment service or its $4 to $12 same-day service. Or use your free online bill-paying feature if it will get the money there in time.
Never pay a mutual-fund sales fee, or “load,” which can be a whopping 3 percent to 8.5 percent of the amount you pay for fund shares; buy only true “no load” funds. Reduce management fees that can tax your balances by as much as 1.5 percent every year, which hurts long-term returns, by shopping for stock funds with fees below 1 percent and index funds with fees below 0.4 percent.
And stay away from variable annuities and the mortality and expense risk charges they come with. Annuities are overpriced, and it’s hard to comparison shop to begin with. But such charges cost 1.25 percent of the annuity’s asset value every year to insure the insurer in case you live longer than their calculations supposed.
Sidestep airline telephone-booking fees of $25 to $35 per ticket by reserving and buying online. Include baggage fees to compare the true cost of low-fare come-ons, and consider two carriers highly rated by our readers that let you check one bag (JetBlue) or two bags (Southwest) free on domestic flights.
The additional dealer markup, often found on new or high-demand models, can be made to hit the road if you threaten to bail on the deal or simply wait until that hot model cools down. And let the salesman know that because manufacturers pay dealers to remove coatings and coverings that protect vehicles during shipping, you won’t be paying that dealer-prep fee.
This article also appeared in the February 2014 isue of Consumer Reports magazine.
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