InvestingAnswers Articles

These 6 Sneaky Fees Can Kill Your Budget

Lisa Bertagnoli — Tue, 22 May 2012 10:51:37 -0400

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.

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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.

This article originally appeared on InvestingAnswers
Author: Lisa Bertagnoli
These 6 Sneaky Fees Can Kill Your Budget

1st 5 Money Moves A New College Graduate Should Make

Linsey Knerl — Mon, 21 May 2012 08:49:14 -0400

The season of new grads is officially upon us, and the U.S. National Center for Education Statistics anticipates over 3.4 million degrees will be handed out to students completing their secondary education in 2012. With so many young adults entering the consumer world, often without the assistance of parents, the first few steps couldn't be more important.

Here are the first five things you should do once you've gotten that degree and are preparing to enter the "real" world for the first time:

1. Create a Budget

This step is not only deemed to be one of the most important actions for a new graduate to embrace, it's a skill that will benefit them throughout their lifetime.

Howard Dvorkin, founder of ConsolidatedCredit.org and author of "Credit Hell: How to Dig Out of Debt," advises grads to realistically consider their "true" salary of any new job. "Many college grads are starry-eyed at the salary they will be making at their first job. They should do their homework and find out the difference between the gross and the net pay they will be receiving." This will ensure budgets are realistic and can effectively be used to succeed.

2. Prepare For New Taxes

Many college grads have already filled out a simple tax form, but they may have previously been claimed as a dependent on a parent's return. Proper handling of tax reporting should happen many months in advance of the deadline, says Dvorkin. Deductions that can be overlooked come tax time, include:

Resume services
Mailing costs
Interview travel costs
Moving expenses
Charitable contributions

All expenses should be documented carefully throughout the year to maximize tax savings.

3. Obtain Insurance

If the new grad was under the age of 26 upon entering college, chances are good that they have never had to purchase insurance on their own. Graduates may find themselves looking to get independent policies for car, renter's or even health insurance, however, and these new expenditures can be costly.

For car insurance in particular, Dvorkin suggests these actions for keeping premiums within the budget:

Consider safety. Ask your insurance agent to check your vehicle against the National Highway Traffic Safety Administration's safety report. Cars with higher safety ratings will come with a lower premium.
Pay in advance. Many insuring companies charge between $2-$15 a month to break up an annual premium into monthly installments. Prepayment will save more money.
Raise the deductible. Unless there is a lien against your vehicle due to financing, there may not be a need to get the most expensive coverage available. Raising your deductible from $250 to $500, for example, can potentially lower your overall premium by 25%.

4. Open a Single Credit Account

Kevin Gallegos, Vice President of Phoenix Operations at the Freedom Financial Network, emphasizes that getting credit right is more important than having a high volume of credit available. In addition, he advises grads to do the following:

Stick to one card. Consider this card to be your only plastic, and use it as you would cash.
Never carry a balance. Paying interest is not in a consumer's best interest.
Consider a debit card. During the first years of learning, this flexible solution can set patterns of healthy credit use in place.

5. Check Your Record

Getting a peek at your credit history is recommended at least annually, and new grads can grab a copy for free from all three reporting companies by visiting AnnualCreditReport.com. According to Gallegos, not only is a sound credit history necessary for securing future credit for a house or a car, it has been a deciding factor in job eligibility, as well. New grads may find they need to resolve a sticky credit situation before getting the career of their dreams.

The Investing Answer: While easier said than done, the most important move a new grad can make is to master the art of living within financial means and making a lifelong commitment to do so. Not only will it open greater opportunities in the consumer credit realm, it will allow for a lifetime of lower stress and greater overall happiness.

This article originally appeared on InvestingAnswers
Author: Linsey Knerl
1st 5 Money Moves A New College Graduate Should Make