Unwanted fees have a way of taking their toll on budgets insidiously. They arrive every month, neatly hidden among the lines of legitimate charges from banks, credit card issuers and utility companies. Each one separately may not amount to much, but add them all together and the costs become significant -- much like how adding a pound a year for several years eventually leaves you with a much larger waistline.
To be sure, some fees are unwanted -- but not unwarranted. Count late fees on mortgages and overdraft fees on checking accounts among that number; they're certainly pesky, but they are the result of untidy financial management. More than one a year should spark smart consumers to take a closer look at the way they handle money.
Meanwhile, here are examples of six stealth fees, with simple steps you can take to trim them.
1. Maintenance Fees.
What They Are: Banks typically expect something from you in return for 'free checking,' whether it's keeping a minimum balance or making a certain number of debit-card purchases a month. When you don't hold up your end of the bargain, you're charged a maintenance fee of $10, $12 or more a month.
How to Avoid Them: Hold up your end of the bargain. If you can't, call your banker and ask for a new deal, says Denise Winston, principal at Money Start Here, a financial advising firm in Bakersfield, Calif. To catch your banker in a good mood, call on a non-busy day: Thursday is ideal, Winston says.
2. Cramming.
What It Is: Cramming is a utility company's practice of loading your bill with extra charges. Phrases such as 'service fee,' 'service charge,' 'other fees' or 'membership' can indicate cramming, and can add $20 or more to a bill.
How to Avoid It: Make sure you understand every single charge on your utility bills. If you can't, call the utility company and ask for a line-by-line explanation. Then ask to be reimbursed for charges you are not responsible for, says Tom Joyce of the Better Business Bureau serving Chicago and Northern Illinois.
3. ATM Fees.
What They Are: Many banks charge if you use an ATM machine that's not theirs or that's out of their network. Not only does your bank charge; the 'guest' bank charges as well. These fees appear on your monthly bank statement, and they can be as high as $6 ($3 from each bank) per transaction.
How to Avoid Them: If your bank offers a set number of ATM transactions with your 'free' checking account, stick to that number, or ask your bank to change it, says Dave Jones, president of the Association of Independent Consumer Credit Counseling Agencies, a nonprofit based in Fairfax, Va. And, he adds, avoid 'foreign' or out-of-network ATM machines.
4. Garbage Fees.
What They Are: They're fees for title searches, applications, points (a percentage of the loan charged as a fee) and other services that banks work into 'no-cost' loans. How can you tell? Compare the quoted interest rate with the APR, or annual percentage rate, which is the fees expressed as an interest rate, Winston explains. The quoted interest rate and APR should be the same -- a higher APR means you're being charged fees, and your monthly payment will be that much higher.
How to Avoid Them: Ask your lender what the fee is and why it's hidden in a no-cost loan, Winston says. If it's a fee that you can't negotiate away, try to pay it out of pocket rather than have it buried in an interest-bearing loan.
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5. Credit Card Annual Fees.
What They Are: It's the fee your credit card issuer charges to allow you to use the card; it appears once a year on your credit card statement. Not all cards have them, but the ones that do typically range from about $40 to $85. Fees on higher-end cards, though, can run in the hundreds of dollars.
How to Avoid Them: You can pick a card that doesn't offer one. If you already have a card with an annual fee, closing your account can seriously damage your credit rating because it shrinks your amount of available credit, Winston says. Too, if the card offers a perk such as miles or cash back, the benefits you reap might outweigh the annual fee. Still, if you've been carrying the card for a dozen or more years, ask the bank to waive the fee. 'They want your business, especially if you have good credit,' Winston says.
6. Fiduciary Fees.
What They Are: Every year, many brokerages handling your investments charge $35 or more for the privilege of handling your money.
How to Avoid Them: If you're happy with the way the brokerage handles your money, it might be worth the $35 or so a year. But pay it by check rather than have the brokerage take it from your investment balance. 'You don't want to deplete the amount compounding interest,' Winston says. If you're not happy, consider switching to a fee-free brokerage.
The Investing Answer: When it comes to bills, pay attention. 'Read your mail,' Winston advises, 'even if it's just the bullet points in the fine print.' If you don't understand a fee or clause, call your bank or lender. If that seems tedious or too much trouble, think of the money you'll save in terms of an hourly fee. 'If it takes me five minutes and I save $75, what's that?' Winston asks.
The answer? $900 an hour.
