In my debt reduction seminars, one topic that generates lively discussion is something I refer to as “unconscious spending”. To me, unconscious spending is simply any fee I pay any commercial bank or credit card company. Examples of these fees include the dreaded account maintenance fee, ATM fees, overdraft fees, and so on. Bankrate.com tells us that the average ATM fee is now $2.00, and the “foreign ATM fee” for using an ATM outside of your own bank adds another $1.32.
Partly as a result of new banking regulations, banks are raising these fees at an alarming rate. In an effort to steer interactions online, some banks make a big distinction between accounts opened online versus dealing with a local branch. For example, Bank of America’s “My Access” checking account has no maintenance fee if opened and maintained online, versus a whopping $8.95 a month for the privilege of actually dealing with a branch. According to Bankrate.com, the monthly fee on that account has increased from $5.95 last year, an increase of 50%! Citigroup’s $7.50 monthly fee for their “EZ Checking” kicks in if the minimum balance falls below $1,500.
It’s even worse for interest bearing checking, where the average fee is now $12.55, an all time high according to Bankrate.com.
Think about your relationship with your bank. You might receive .2% interest on your savings account, and after paying the monthly maintenance fee you are actually losing money month after month.
So why do I call it unconscious spending? One of my recent graduate students from Baltimore spent 2 years at our school. When she left Baltimore, she had $200 in a bank savings account. She knew she was receiving a very low interest rate but never touched it, and was shocked to return home to find less than $60 in her account. Why? Do the math. In her case her balance has apparently fallen just barely below the minimum, and after 24 months and a $5.95 monthly fee – well, you can see how quickly her money disappeared.
How can you avoid unconscious spending? The most obvious answer is to choose the right bank and the right bank account. And yes, you DO have to read the agreement that lists the fees you will have to pay. Shop around! Websites like Bankrate.com and findabetterbank.com allow you to compare accounts, terms and fees.