Fees are a company’s way of making money from doing business with them. There is no need for you to become the cash cow of any firm. In general, there is enough competition among and between businesses that you can find one with lower fees than you are currently paying. Or better still, you can find an operation that charges you no fees at all.
Two businesses that are notorious for their fees are banks and airlines.
Avoid Paying Bank Fees
Banks are in business to make money for their shareholders. Make no mistake about this. You, as their customer, come in a distant second in their hierarchy of concern. You are simply the source of profit that the bank passes on to its owners. With so many of you out there, you are replaceable.
Banks make money in two ways. First, they earn interest on your money, the money that you leave on deposit with them that they re-invest in things like the sale of mortgages. Second, they earn profits by charging you fees to use seemingly any service that you need that involves the use of your money that, remember, they are making money on by reinvesting.
To increase their profits further, banks are constantly trying to incentivize you into using some services more than others. So they will reduce or eliminate fees when you use these services.
Avoid Paying Fees
Most of these fee reductions involve automation. For example, one of the banks that I do business with eliminates the monthly service fee for my checking account if I use my debit card more than ten times in a month. I assume that my bank is trying to direct me away from writing paper checks which I also assume, are more costly to process than debit card transactions. Although why my bank doesn’t simply charge me more for writing checks remains a mystery to me.
The bottom line here is that I use my debit card ten times a month, at least, and no longer write checks.
Other banks offer incentives in the form of reduced fees for not using teller services, not writing checks, and for using only the ATM (for which there are often, of course, other fees, so be aware).
I recently opened an account with a new bank when they offered me not only reduced fees for the direct deposit of my paycheck, but a $50 incentive as well.
The important point to take away from all this is that if you shop around, you can often find incentives ranging from the reduction or complete elimination of all fees to outright bribes for your business. Those of you as old as I will remember the days of toaster oven giveaways. I don’t believe there are any of those any more.
One more note on bank fees, avoid the overdraft fee whatever you do. The size of these fees are all out of proportion to what they should be and are a testament to how badly the bank wants to penalize you for services that have to be processed by a human being.
Look to Credit Unions
When you shop for lower banking fees, a good place to start looking is at a Credit Union. You can find Credit Unions everywhere. They are often associated with your place of employment, type of job you have or where you live.
Credit Unions do not generally offer the complete line of services that do full service banks. But membership in a Credit Union can give you lower fees as well as access to lower cost mortgages and higher interest rate savings.
Airline fees are notorious. Thanks to a lack of competition, they are also hard to avoid.
The most outrageous fee is, of course, paying for your baggage to fly with you. There are only two ways to avoid this horrid fee. First, you can only take carryon baggage. Be aware though, if your carry on is too heavy, the airline will make you check it and charge you the check baggage fee.
The second way to avoid the fee is to fly an airline that does not charge one. To the best of my knowledge, Southwest Airline is the only USA carrier that falls into the class. For this reason alone, I fly Southwest whenever possible.
I recently was forced to suffer the nightmare of a six hour Greyhound bus ride. While I only had one bag to check, one of my mates had to pay an extra $15 for their second checked bag. Apparently, stupid ideas trickle down. There are alternatives to Greyhound in many markets.
Fees are killers. They can eat away at your budget if you let them. But by being aware of what they are and shopping around you can limit their impact.