Understanding
the New Overdraft Law
Being
financially smart means keeping an eye on fees – all fees.
Starting
July 1, new federal rules kicked in that require bank=
s to
require customers to opt in for overdraft coverage. Overdraft coverage is a
line of credit that kicks in when account holders make purchases that exceed
their available checking and debit account balances.
To get customers to sign up, some
banks are slashing their overdraft fees. Under the new law, if account hold=
ers
don't opt in, banks won't be able to cover their charges when their account
balances fall short. The charge simply will be declined, and the customer w=
on't
be charged an overdraft fee, which at some banks had gone well over $30.
Yet if you have overdraft protecti=
on,
that means you will have to pay a fee, sometimes on a rising scale that tak=
es
you back to the fee you were paying when you didn’t opt in for such
coverage.
So how do you avoid overdraft fees
entirely? Start acting responsibly.
Don’t join, but keep an eye =
on
that balance: If you don’t opt in, you won’t be charged overdra=
ft
fees, period. But then it becomes your job and your job alone to make sure =
your
accounts are covered. Redouble your efforts to record transactions and
double-check those balances. If you bank online, you can do this every day =
if
you choose.
Keep
a particular eye on debit transactions: Many in-store
debit transactions will not automatically be rejected, so that’s why
checking your account often is so critical. That’s why that if you
don’t use financial planning software to download your transactions o=
n a
daily basis, it might be time to do so. Checking your banking statistics at
regular intervals will not only help you keep an eye on overdrafts, it will
help you spot bank or personal errors and possibly I.D. theft.
Sign
up for bill payment alerts or keep a reliable calendar:
Most banks and credit card companies will give you the option to have bill
payment alerts sent to you five or more days before they’re due. Even=
if
you write these dates in a calendar, it’s not a bad idea to have back=
up.
What about other fees? Keep in mind
that overdraft fees are not the only bank charges you need to watch. Last
September, Bankrate.com released the following =
data
on ATM and checking account fees:
·
NSF or bounced check fees rose to a
record high of $29.58 in 2009, rising 2.7 percent annually on average over =
the
last decade.
·
ATM surcharges – fees for wh=
en
you use an out-of-network ATM – rose 12.6 percent from 2008-2009 with=
an
average fee of $2.22. According to Bankrate, ATM surcharges have gone up at=
an
average rate of 7 percent a year since 1999.
·
Interest-bearing checking accounts=
had
fees averaging $12.55 a month, up nearly 5 percent from 2008 levels, though
non-interest bearing accounts hit a new low of $1.77 a month.
And don’t forget these other
nagging fees you should watch:
Credit card fees: Late fees, processing fees, and surcharges on c=
ash
advances are just some of the fees that banks and credit card companies use=
to
increase their revenue. Just as you become more diligent in examining your
banking options, apply the same standards to your credit cards.
Retirement plan fees: If you work for a company, it makes sense to ask
your human resources department how much they’re paying in fees to yo=
ur
401(k) plan manager – or managers.&n=
bsp;
As for your personal retirement investments, check your portfolio
management fees: Also known as assets under management (AUM) fees, these ar=
e various
fees that might be assessed against professionally managed portfolios. It is
always important to understand these fees, see how they compare with compet=
ing
types of portfolios and investments and keep an eye on what triggers them. =
Restocking fees: Avoid retailers who charge restocking fees, particularly for
electronics. While certain ch=
ains
have dropped them due to customer protests, make sure you call the store or
check their sales policies online before you spend.
If you do a
financial checkup every six months, it might not be a bad idea to start
examining the fees you pay to all sources and determine whether there’=
;s a
more affordable way to save, spend, shop and invest. Weigh these options
against any incentives you might gather along the way.
-=
30-
<= o:p>
This column is
provided by the Financial Planning Association® (FPA&re=
g;)
of Nevada, the leadership and advocacy organization connecting those who
provide, support and benefit from professional financial planning. FPA is the community that fosters =
the
value of financial planning and advances the financial planning profession =
and
its members demonstrate and support a professional commitment to education =
and
a client-centered financial planning process. Please credit=
FPA
of Nevada if you use this column in whole or in part.
The Financial Planning Association is the owner of trademark, service mark =
and
collective membership mark rights in: FPA, FPA/Logo and FINANCIAL PLANNING
ASSOCIATION. The marks may no=
t be
used without written permission from the Financial Planning Association.
|
Contact: Judith Filangeri Reno Contact: Greg Crawford, CFPÒ 775-297-4682 |
2-2-2