In the current economic environment, consumers can’t afford not to pay attention to what their bank is charging for services.
That’s what experts in the industry say in the face of ever-increasing fees.
Bob Hammer, chief executive officer of bank-card advisory firm R.K. Hammer, said those fees are likely to continue increasing as banks find themselves deriving less income from loans in the tightened credit environment and limited on the fees they can charge on credit cards because of new regulations passed by Congress.
“You can take it to the bank,” Hammer said. “Because banks have been restricted on what they can do because of restrictions on rates on credit cards, you can guarantee you’ll see more fees.”
Banks in 2008 derived 53 percent of their income from things like late fees, loan origination fees and overdraft charges, Hammer said. That compared to 35 percent of income derived from fees in 1995.
He believes the trend will continue.
“If I was running a bank again, I’d be looking at every single one (fee) and see if we were getting full value for the services we provide,” Hammer said.
Mike Woody, a banking analyst who served as a consultant to Coast Bank in Bradenton, which suffered from non-performing loans and nearly collapsed before selling itself, said fees are an easy place for banks to derive income.
“Non-interest income has become more and more important for two reasons,” Woody said. “First of all, there’s no capital involved to make money. And two, the profit margins are higher.”
For the consumer, however, some of those fees are avoidable, Woody said.
“You don’t want to pay overdraft fees, don’t write a hot check,” Woody said. “Nobody’s making you do it.”
Frank Knautz, local banking consultant, said fees represent a large-scale opportunity for banks, particularly the larger ones.
It’s an opportunity they are not likely to give up any time soon, he said.
“This is a trend we will continue to see as large ‘money center’ banks attempt to boost their fee income,” Knautz said. “Fees can be ‘inched up’ and the amount of revenue generated becomes a very large number due to the large number of accounts.”
Greg McBride, senior analyst with Bankrate.com, said consumers particularly need to pay attention to ATM fees.
The average ATM surcharge in 2008 was $1.97 for a customer using another bank’s ATM, McBride said. The average fee charged by a customer’s own bank for using an out-of-network ATM was $1.46, he said.
“If you go to another bank’s ATM, that’s where you’re going to pay and typically you’re going to pay twice,” McBride said. “You’re going to pay the ATM owner, but you’re also likely to pay your own bank a fee for going outside the network.”
As of 2008, the average overdraft charge was $28.95, but those charges can go as high as $35 for second and third offenses, McBride said.
Monitoring one’s balance and planning out one’s ATM withdrawals are good ways to avoid paying those extra fees, McBride said.
“People will spend five hours a day on Facebook and they won’t take five minutes to check their account balance,” McBride said. “We’re in an era of 24-7 online account access. You can overdraw your account just as easily with an online payment or a debit card as you can by writing a check. Before you initiate transactions, take a look online at what your available balance is. Keeping accurate tabs on your available balance is a way to prevent overdrafts.”
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