I laughed when I read an article today from CNN Money about Chase Bank’s failed test of a $5 ATM fee. Five dollars! Are you serious?! Next thing you know you’ll be telling me that gas is more than $4! Hey – wait a minute!
If you have followed this blog for any period of time you know I am quick to complain about bank fees – something I refer to as “unconscious spending”. As legislation has curtailed many of the outrageous bank lending and credit practices, banks have seen a precipitous drop in their fee income.
But now it has gotten completely ridiculous and, even though Chase has given up in their two-state test, I do hope that you will still look at the true impact these ridiculous charges have on the typical bank customer. As I have said many times, in finance we should always consider the percentage that fees such as this represent as compared to what we receive from the bank as interest on our deposits.
In the Chase $5 example, the math is pretty easy. If we get $20 from an ATM and pay a $5 fee, we just forked over a 25% fee. Outrageous! I suppose you could argue we can soften that blow by taking out $50 or $100 for the same $5 fee, so that now we’re only paying a mere 10% or 5%. But what does the bank give us for depositing our money, in this case in a Chase Bank savings account? You will be lucky to get interest of just .1%. No, not one percent – that’s one tenth of one percent. And keep in mind that the .1% is an annual rate, while the 5-25% ATM is per transaction.
So if you put your money in the bank, you get .1%. If you take out $100 from your bank’s ATM, it’s 5%. Does anyone really need to be a financial expert to see a problem here?
How do we avoid these fees? Here’s a great article from one of my favorite sources , BankRate.com , with some great tips on how to minimize your exposure to fees and keep your unconscious spending to a minimum.
My common sense advice? Shop around. Find a local bank or credit union with a fee structure that shows they care about their customers and the fees they charge them. Of course, you might not want to start with Chase…