You keep careful track of your debts, deposits, and expenditures — but you still can't get your checkbook to balance at the end of the month. Is someone monkeying around with your money? Could be, and one likely suspect is your friendly neighborhood bank. Finance writer Wendy J. Cholbi says banks are waging war on their customers' pocketbooks with outlandish fees — and she's got some practical ideas about how you can fight back! Published October 13, 1997 You're ready to balance your checkbook. You've got your calculator, your stack of checks from last month, your ATM receipts, and your bank statement. But when you start to add everything up, there's a problem: you weren't accounting for all those fees that appear on your statement. There's a checking account service charge, a couple of ATM withdrawal fees, and a charge for the time you checked your balance by calling the touchtone system. What's going on? Business as usual, and you need to know why and when banks charge fees in order to avoid them. The first thing to remember is that banks are not altruisitic. They exist to make a profit, and they charge what the market will bear. The corollary to this fact is that, like any other business, banks depend on customers. There are more than 8,000 banks in the U.S., and you, the consumer, can shop around and vote with your dollars for a bank that offers the services you need without breaking your budget. Banks make their money by taking deposits and loaning them out at a profit. Whether or not you pay any surcharges, the bank is still making money off your money. One logical question to ask is: Why should I, a customer, pay a bank to take my money and make a profit on it? The answer is that most bank customers are simply unprofitable. A bank's overhead costs include the personnel to staff the branches and keep accounts updated, interest on savings accounts and CDs, and printing and postage to mail monthly statements. A customer who maintains a high balance is automatically profitable; the interest the bank earns on loaning out, say, $10,000 more than covers the overhead. But, many customers don't maintain such a high balance. They deposit a paycheck every week, write checks to pay bills, visit a local branch once in a while, and use ATMs to check balances and obtain cash. Sounds rather...normal, doesn't it? When banks figured out that normal customers were unprofitable, they devised ways to make them into cash cows. Why not charge low-balance customers a fee for not paying their own keep? Why not charge a per-check fee, since banks account for costs on a per-transaction basis? Clearly many people are willing to pay fees, because banks are still charging them and inventing new ones. But that doesn't mean everyone has to accept every fee. Here are some tips to avoiding the surcharge swindle: Read the fine print. Banks are obligated to provide a written description of their fee schedule to anyone opening an account. This is often the only place fees are mentioned, so read it carefully and thoroughly before depositing your money. Get overdraft protection. Even if you just bounce a teeny little $5 check, it will still cost you a $25 (or more) overdraft fee. You may have to pay a fee to set up the protection, but this is one case when a fee is worth it. Shop around. Banks are competing for customers, even unprofitable ones like us regular folks. An unprofitable young customer may, after all, become a profitable customer later on if s/he keeps a relationship with a bank. Many banks offer specials, such as waiving account fees for one year for new accounts, or low-fee Student Checking accounts. Ask about these. Say you're considering opening an account but are concerned about fees. A bank officer's reaction to this statement can often reveal everything you need to know about their attitude and policies ("You're concerned about what?" vs. "Let me tell you about our no-fee checking account."). Compare the fee schedules from different banks in your area. Be aware of your banking habits. How often do you really need to visit a branch? How often do you visit the ATM? Is it important to you to be able to get phone information on your account at any time? Answering these questions will help you pick a bank that's suited to your needs, or tell you if you need to change your habits to save money. For example, if you write only five or six checks per month, you may not need unlimited checkwriting priveleges. If you can consolidate your ATM visits by withdrawing larger amounts less often, you can save on fees. Be vigilant about ATMs. If your bank charges you for ATM transactions, my advice is to pick a different bank. But even if your bank doesn't charge ATM fees, you may be charged a fee by the owner of the ATM, which may be a competing bank, a grocery store, gas station, etc. On the one hand, this is a simple case of paying for convenience; if you want instant gratification, you're going to pay for it. On the other hand, there are ATMs out there that don't charge, and once again you can vote with your dollars. Are you willing to walk past one bank's ATM to get to your bank's ATM? Would you do it if it saved you a $1 fee? Would you do it if it saved you a $5 fee? Get to know the ATMs in your area that don't charge. Several California banks have banded together in a "no surcharge" alliance, and ATMs owned by them feature a no-surcharge logo. ATM surcharges are prohibited in two states (Connecticut and Iowa) and legislation is being considered in several states to ban the fees. If the issue is important to you, write your Congressman, but until then, stick with being a crafty consumer. RETURN TO PERSONAL FINANCE MANAGEMENT MAIN PAGE Read more columns by Wendy Cholbi Wendy J. Cholbi is a writer who lives with her husband, a philosopher, in Charlottesville, VA. Although lacking a comprehensive business wardrobe, she is the editor of three financial publications (Monthly Market Report, Bank Investor, and Strategic Adviser) for SNL Securities. © 1997 Tripod, Inc. All Rights Reserved.