Banks Ax One Fee—But Watch Out for Others

Bank of America and others have rescinded debit-card fees, but there are many other ways to dun customers.

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Score one for consumers.

With Bank of America rescinding its plan to charge debit-card users a $5 monthly fee, virtually all of the big banks have now scrapped controversial new programs that would have essentially charged customers for the privilege of spending their own money. Many of the banks had described the new fees as a test program—but what they were really testing is whether their customers would revolt.

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The answer turned out to be yes. Bank of America, J.P. Morgan Chase, Wells Fargo, Suntrust, Regions, and several other banks rolled out the new fees just as the Occupy Wall Street movement was gaining traction, providing a tangible, sound-bite example of banking excess just when critics needed it. Many customers at the offending banks threatened to decamp for other financial institutions, although some of them probably would have found it too inconvenient. Still, the media firestorm made retreat seem inevitable, even though the amount in question, at most banks, was less than the typical office worker spends on lunch in a given day.

The victory for consumers could be fleeting, however. With revenue and profit down sharply at most banks, there's intense pressure from shareholders to boost their numbers. There are a lot of different ways for banks to impose fees and raise revenue, and with fees for debit cards off the table, banks will most likely look for less noticeable ways to wring money from their customers. "If the banks' revenue streams are cut in one area, they'll find a different area to make that up," says Bill Hardekopf of lowcards.com. "New fees could be more subtle, more under-the-radar."

Banks typically have to notify their customers when they raise prices or impose new fees. But customers don't always check their statements carefully or read all the notices that appear in the mailbox. The debit-card fees generated an unusual amount of bad publicity for the banks, so a lot of customers may have caught wind of the scheme before hearing anything from their bank. The next set of fee hikes may be far less apparent. Here are several types of new fees consumers should watch out for:

Interest rate hikes on credit cards. This may be the easiest way to hike fees without attracting much attention. One reason the objections to debit-card fees were so intense is that debit cards are merely a tool allowing people to spend money they've already deposited in the bank. Credit cards are different, since the bank is effectively loaning you money to make a purchase. That makes fees—usually charged in the form of interest on credit-card balances—less controversial. Plus, banks already charge interest on credit-card balances, so a hike in the rate seems more palatable than a new fee that didn't exist before.

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New rules passed in 2009 prevent most card issuers from raising interest rates during the first year after a new card has been issued. But once the yearlong grace period is over, banks have much more freedom to raise rates. "Banks have to give notice," says Hardekopf. "But we have to notice the notice." So cardholders need to watch their statements closely, especially if they're nearing the one-year mark on a new card. Paying off your balance, of course, is the best way to assure you won't get saddled with rising interest costs.

Annual fees. More credit-card issuers have been trying to impose annual fees on credit-card accounts as well. They're required to tell you about any changes, but such notices are sometimes disguised as "enhancements" to your service that, incidentally, will suddenly cost you $40 or $50 per year. So once again, it pays to scour all notices from your issuer and be skeptical of any offer that sounds like a gift from the bank.

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Checking-account charges. For many bank customers, free checking is becoming a thing of the past. The latest survey by Bankrate shows that just 45 percent of typical checking accounts are free, down from 76 percent two years ago. And "free checking" almost always comes with a set of requirements these days. Those tend to include a minimum balance of $3,000 or more, the use of direct deposit (to cut down on the cost of live tellers), and the use of the bank's online service to pay bills (which makes it harder to switch to another bank). While fees for a checking account are unpopular, the fact that they're becoming standard makes it easier for banks to simply raise the monthly fee by a couple of bucks, or raise the threshold so that fees apply to more people.

Usage fees. Surcharges for using other banks' ATMs have also been going up. And fewer banks offer to cover such charges as a perk for their customers. Some banks also charge extra for things like writing too many checks, using the teller window too often, talking to a customer-service agent on the phone, or engaging in too many transactions. Hitting customers with just a couple of such fees every month could easily raise more revenue than the $5 debit-card fee would have. To keep track of such rules, consumers should ask for their bank's "fee schedule" and try to work around all the rules that apply to them. Sometimes just knowing the rules is all it takes to avoid annoying fees.

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Sneaky fees. Consumers should also check their monthly bank statements for charges they don't recognize, such as "low balance" fees or overdraft charges that don't seem right. Despite recent reforms, banks still have some leeway to manipulate your money in ways that allow them to charge fees you may not agree to. It's smart to question any charges you haven't explicitly authorized and ask the bank to remove them if they seem bogus. The bank may not always agree, but it can't hurt to complain. Sometimes banks even listen.

Twitter: @rickjnewman

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