Seven Ways to Beat the Bank

The upheaval in today’s economy is forcing banks to find new ways to strengthen their bottom lines—and much of that effort is coming at your expense.

Increasing service charges and widely varying interest rates are just two of the techniques banks are using to pump up their slumping profits during these troubled economic times. According to the Kiplinger Letter, overdraft and credit card fees will climb 5 percent in 2009, double the 2008 increase. Late fees for credit payments will soar and ATM fees may jump 20 percent.

This situation could cost you real money unless you learn how to play by the new rules of the game.

Here’s how:

1. Keep an eye peeled for sneaky bank charges

In a largely invisible ploy, some banks make customers pay big penalties for small errors.

Let’s say you accidentally overdraw your checking account. You have $300 in the account and you write three checks in one day. The first is for $10, the second for $20 and the third for $320. Some banks process checks not in the order they receive them, but in order of size. In such a case, the bank will process the $320 check first. That would mean all three checks, not just one, would bounce. Then you’d be hit with three separate overdrawn check charges. Since those have risen to $35 at some banks, you could be out as much as $105 in painful overdraft charges.

Crystal Watkins, a vice president at Torrey Pines Bank in San Diego, suggests signing up for an overdraft protection line of credit, available at most banks. “This would be much less expensive than the heavy fees incurred when a check bounces,” she says. “When money is tight, as it is now, you don’t want to lose any of it to unnecessary fees.”

2. Ask for a waiver

These days, the banking industry is more competitive than ever, and as a result many banks are willing to waive such charges as late fees, overdraft fees and check printing charges—but only if the customer asks. If the service rep can’t help you, ask to speak with a manager.

Certified financial planner Christine Moriarty of Bristol, Vt., suggests going to the branch that opened your account to ask for a waiver, since that branch will have the most flexibility. “But don’t ask too often,” she cautions. “They’re not going to do it on a regular basis.”

3. Invest wisely in certificates of deposit

Certificates of deposit have long been considered a safe haven for conservative savers with cash to invest. CDs insured by the Federal Deposit Insurance Corp. are still among the safest ways to protect your principal, but the new economy has brought about important changes that affect CD investors.

The Federal Reserve’s steady lowering of short-term interest rates has affected long-term CDs to the point where the return on a five-year CD may not exceed the inflation rate. That’s why you should stay away from long-term CDs until interest rates rise.