They seem to be everywhere you look, yet they are hardly noticeable. What am I talking about? Fees. Nearly everything these days from checking accounts, to credit cards, and even investments have fees that are eating away at your net worth.
While these fees may seem like drops in the bucket each month, compounded over time, they take a big bite out of your assets. Here are some of the biggest fee offenders and how to lessen their impact, or rid yourself of them altogether.
Bank Fees
Some big banks have monthly maintenance fees that range from $12-$20+ each month, if you don’t meet certain balance requirements, or use direct deposit. Not only that, add ATM fees and overdraft fees to the mix, and your bank could be hitting you up for money every month!
While you can play by the rules and avoid some of these fees, you’re still at the mercy of the big bank, their system, and their rules.
How do you avoid these bank fees? Explore an online bank or a credit union. Online banks save money by not having brick-and-mortar institutions, therefore giving them the ability to offer checking and savings accounts with no minimums and no fees.
Five years ago I was fed up with the big bank I had used for the previous ten years. So I switched both my checking and savings to an online bank with no fees. At first I was worried about not having a physical place to cash checks. However, as technology has increased it’s easier than ever to deposit checks via my mobile phone.
Another option is banking with your local credit union. Credit unions are member owned and oftentimes offer great rates for their products and services.
If you’re constantly being hit with fees from your bank, it may be time to break up and look into a better option.
Credit Cards
What is the best way to avoid credit card fees? Paying your balance in full, on-time, every time! If you are getting hit with late fees, or accruing interest on your credit card balances, consider going on a cash detox until your credit card spending is under control.
To help you remember when to pay your credit card, sign up for reminders through your bank. For extra measure, you can even set yourself a reminder in your online or physical calendar.
Another way credit cards can hit you with fees is through annual fees for rewards credit cards. As a travel hacker myself, I think it’s really important to assess if you think the annual fee is actually worth it to you. Some people sign up for rewards credit cards and simply go on auto-pilot, and for years they’re charged upwards of $100, without actually using many of the rewards.
If you have a rewards credit card sitting around that’s charging you an annual fee, consider closing the credit card. Beware that by doing so, you will be closing out that positive repayment history, as well as that credit utilization — all which affect your credit score. This is not to say that you shouldn’t close a card with a hefty fee if you don’t use it, I’m just saying it’s important to understand the ramifications of doing so.
Investment Fees
Investing is a key aspect of building wealth in the long-term, yet investment fees can take a huge chunk out of your nest egg. You might not even realize that fees are getting taken out, or even how much.
Even many of the robo-advisors take out fees, although they are at a much lower rate compared to other brokerages and financial investment advisors.
How do you lessen investment fees? If you want to know just how much fees are getting taken out of your nest egg, explore FeeX.com, the Robin Hood of Fees, to help you see exactly how much you’re paying in fees. They can also offer lower cost alternatives.
Fees may seem like just a small thing and part of life, but they don’t have to be. With some careful planning and diligence, you can wipe out fees completely, or ensure that your fees are at a comfortable level, compared to your net worth.
The main thing is to make sure the fees being taken out are worth it for that particular product or service. It never hurts to shop around and see if there is something better!
How do you avoid paying excess fees?
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It’s not only banks and all, either. People often find “try free now” payment options irresistible – magazines, online services, telecommunications, etc. etc. etc. They may even mean to cancel the service before the first fee shows up, but many of us aren’t quite organized enough, and end up getting hit with fees. Then there’s the actual cancellation process… Scott Adams (of Dilbert fame) wrote a funny article about how he was likely to keep paying some small fees forever, simply because cancelling never seemed worth the time/hassle, compared to the fees. Fees really are everywhere.
Great tips here. A lot of people don’t often think of the ways banks and credit cards take a little money here, a little money there – that ends up a huge sum. Thanks for sharing your insight on how to avoid that!
You’re welcome! Thanks for stopping by!