Credit, bank and lending fees can be easy to get stuck with, but they can be just as easy to avoid.
Jonathan Owens, a financial advisor for WestPoint Financial Group, said when it comes to credit cards, how many you should have and the maximum limits on the cards is a personal decision depending on how much you trust yourself.
If people do not pay back credit balances in full at the end of the month, interest is charged. If a credit card owner only pays back the minimum each month, purchases increase in cost after interest. Owens said some purchases could take years to pay off when only paying the minimum.
“Live by paying off your credit card every month,” Owens said. “If you don’t have the money for it, unless it’s a dire need, don’t buy it.”
Credit cards could also come with annual fees, even if you don’t use the card for that year.
Debit cards are about to be subject to changes varying with each bank.
New caps on fees to process debit card transactions, which go into effect July 21, mean that banks will be making less money on each debit card transaction. To make up the difference, some banks are considering new debit card changes which might include annual fees on debit cards, eliminating debit card rewards, charging higher withdrawal fees at ATMs for noncustomers and capping the number or size of transactions you can make on your debit card.
“I have a Chase Rewards Card,” Owens said. “Each time I swipe it and select credit, I get points back on that purchase to use towards cash back or ordering online. Soon, the only way you can get rewards is if you use a credit card. Now, I’m just going to use my credit card to get those rewards, and then at the end of the month I’m going to pay it off because the money will be in my checking account.”
Also, if an outstanding credit balance becomes more than 20 to 30 percent, it negatively affects credit.
Individual accounts at banks have different rules and fees. First and foremost, Jamie Bonner, a personal banker for Fifth Third Bank, said people need to read the details of certain types of accounts. There may be annual fees for accounts, but some banks may not charge annual fees if the account meets a certain balance.
Overdraft fees, when someone has insufficient funds to clear a transaction, returned deposited items, or fees when a check-writer doesn’t have enough in their account at the time a check is cashed, are among some of the most common banking fees.
Fifth Third and other banks offer overdraft protection and overdraft coverage. Coverage allows the debit card to be turned off, therefore disabling it from allowing purchases and overdrawing an account. Protection is when a checking account is wired to a credit card or savings account. If the checking account has insufficient funds, the money will be taken from the wired account. While this can save someone an overdraft fee, there is still a smaller fee to take money from another account.
“I’m old fashioned,” Bonner said. “I tell customers to use a checkbook so you never overdraw. In this world of technology, we sometimes fail to realize where we spend money. If you use a checkbook, you constantly go back and check off what has cleared.”
Finally, when it comes to “Get Cash Now” services, Owens said they should be used as a last resort; credit cards or borrowing money from a friend are better options when strapped for cash.
“If you need $1,000, they may charge you an additional $200 to get cash now, so you spent $1,200,” he said. “At least with a credit card you’ll have a month to pay back the amount. I can’t say why I’d ever use that service.”
Some credit cards will allow people to withdraw cash.
Ultimately, to avoid fees, Owens said it comes down to saving money and not spending more than you have.
“Pay your bills first,” he said. “Whatever you have left is for you, but bills have to be a priority.”