Furious about Fees -- Bank charges go up again

By Steve Davis, CERTIFIED FINANCIAL PLANNER™


Outraged about bank fees? You’re not alone. Citizens Bank recently started charging me $3 per month to mail my monthly bank statement. Bank of America recently announced they would soon start charging $5 per month for using their debit card. And just last week three large banks were sued for allegedly colluding to fix ATM fees. Add to these costs, overdraft fees, phone transfer fees, inactive account fees and you’ll see that it’s a veritable fee for all! According to an April study by the Pew Charitable Trust, checking accounts at the 10 biggest U.S. banks had a median 49 different types of fees.

Infamous Banker Ebenezer Scrooge 
from Walt Disney's A Christmas Carol 

So what’s going on? The problem is that banks are finding it more difficult to make money the old fashioned way. Loans aren’t as profitable as they used to be -- interest rates are at historic lows. Additionally, a new law caps the amount banks can charge merchants, from an average of 44 cents per debit card transaction to 24 cents. According to JPMorgan, this new law will cost them $300 million each quarter in income. Sadly for consumers, the banks have turned on them to recoup the revenue.


Here are 5 tips to help you avoid rising bank fees


1. Talk to your bank: You may qualify for free checking if you sign up for direct deposit of your paycheck, use your debit card a certain number of times, or keep a minimum balance. It’s not always easy for consumers to get clear information about bank fees so make a point to call or sit down with your branch manager and ask.


2. Don’t Use Out-of-Network ATMs: Why tolerate high ATM fees? It is not uncommon for consumers to sometimes pay twice for one ATM transaction – first your bank charges you $2 and then if you’re using an “out of network” ATM, the ATM owner charges you another $2 surcharge. That’s crazy, especially when you’re withdrawing $40 for a night out on the town.

Make a point of using your own banks ATM and withdraw enough cash to last you until you can get to the “free” machine again. If you find yourself without enough cash, get cash back at the point-of-sale when using a debit card. Go to a grocery store or any other retailer that would give you cash back. Buy a small snack if you don’t need to buy anything else. Heck a $1 can of soda or bag of chips is cheaper than $4 in ATM fees; plus you get to enjoy the snack!


3. Go Paperless: You can save money and often avoid statement fees, fees for copies of cancelled checks and other costs by choosing to receive your statements online, or by email.


4. Avoid Penalties: One way banks are trying to recoup revenue is by increasing penalties for bounced checks and late credit card payments.

The Overdraft or the NSF fee is one of the most expensive fees banks charge. The very best way to avoid this is to manage your checking account wisely -- reconcile your account each month and develop a system so you don’t forget to deduct ATM or check payments. If you don’t already have overdraft protection, be sure to apply for this feature. If approved, the bank will link your checking account to a line of credit so overdrafts are paid. You’ll still pay a fee for this service, but it’s a lot less than a bounced check fee.

Similarly, late payments on credit cards are brutal. Miss the due date by even one day and don’t be surprised to see a $35 late payment charge. One easy way to avoid these mistakes is to set up a monthly payment (EFT) that will be automatically deducted from your checking account each month.


5.  Change banks: A recent Facebook campaign organized by the Occupy Wall Street movement is urging Americans who are fed up with escalating bank fees to close their accounts at the large banks (especially the ones that took federal bailout funds) and move their money to small banks or credit unions by November 5.

But switching bank accounts isn’t easy, especially if you use direct deposit, have set up electronic funds transfers to pay for your gym membership or have set up online bill payment. Still, many small banks and credit unions are seeing a flood of new depositors. According to Jim Rice, Senior Vice President at Harbor One Credit Union, “Over the last several months, we have seen a noticeable lift in new account sales as a result of consumer frustration with big bank fee increases."

Keep in mind that fees should not be the sole determinant to whether you stay at your existing bank or not. Personal service, branch location, the size of the ATM network and a variety of other factors should be considered before making a change. As in life, it’s not usually a good idea to make decisions purely on emotion.

Quartery Review: Third Quarter of 2011

By Steve Davis, CERTIFIED FINANCIAL PLANNER ™

I’ve been reviewing my clients' September 30 investment statements and I’m sure you have received your copies by now too. If you're a local reader and would like to review your accounts together or would like to recieve a second opinion from an independent financial advisor, please contact me. In the meantime, this post will attempt to provide perspective on the economy and financial markets over the past 90 days.


Tug-o-War

Growth vs. Sentiment

If there was one thing that jumped out at most investors during the third quarter, it had to be the huge swings in the market. Over half the trading days in the period saw the Dow Jones Industrial Average move more than 100 points in either direction. It was like a tug-o-war: On one side was the strongest quarter of economic growth this year and on the other side was increasingly negative investor and consumer sentiment.

Economic Growth: While the economic data doesn’t point to robust economic growth, the gross domestic product (GDP) is increasing. In the second quarter, GDP was up 1.3% and the third quarter is on pace to grow at a 2–2.5% rate, the strongest growth rate so far this year. Furthermore, the Index of Leading Economic Indicators (LEI) suggests continued slow growth and that a recession is unlikely. Still, the economy is expanding at a pace that is well below historical averages at this point in an economic recovery. 1

Investor and Consumer Sentiment: For some, the slow pace of growth probably feels like a recession. Despite the lack of recessionary indicators, consumer sentiment was at near 30-year lows and this pessimism overwhelmed the market in the third quarter. 2

  

Market Performance
The third quarter was ugly with extreme volatility and the sharpest decline since the first quarter of 2009. The main drivers of the decline seem to have been European debt worries and the waning confidence on both Main Street and Wall Street as analysts began to second-guess the recovery.

 

Below are results for key markets. These are in local currencies, so the effect of swings in the dollar is not reflected.

Source: MSCI


Looking Forward
So that’s what’s behind us – the key question is what’s ahead. What will have to happen to help this market climate improve in the coming months? There are three potential catalysts that might emerge.  

1. A decisive and truly unified effort by the EU to address the debt crisis.
2. A strong corporate earnings season featuring frequent, pleasant surprises.
3. A stream of data vouching that the economy is still growing.

Historically, the fourth quarter tends to be a very good one for Wall Street. Over the last 50 years, stocks have gained an average of 3.6% in the last three months of the year. 3 While the past is no predictor of future results, we can hope the historical pattern repeats in 2011.

Economic challenges and market volatility remain it is important to remain cautious.  But for those investors who need growth to achieve their long-term goals, it is equally important to take a longer view and know that fund managers are seeing many outstanding companies available at inexpensive prices.  For investors with cash on the sidelines, now may be the time to start putting some of that money to work. 

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult me prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly.  The economic forecasts set forth in the presentation may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
 1. Source: Bureau of Economic Analysis, Haver Analytics 10/02/2011 


2. Source: University of Michigan Consumer Sentiment Report 09/14/2011 
3. Source: usatoday.com/money/world/story/2011-10-03/world-markets-down/50640738/1 [10/04/2011]

What To Do With That Rock?

Guest post by: Burt White, Chief Investment Officer, LPL Financial

Burt White

As a kid, there was nothing that I liked more than going to my grandparents’ farm in West Virginia. The animals and acres of open land offered many opportunities for a youngster to have some serious fun and, from time to time, find a bit of trouble to get into. However, I never understood springtime on the farm. Every other house along the four-hour drive from my home to the farm looked so green and adorned with flowers, while my grandparents’ farm in the spring consisted of acres of dirt as far as the eye could see. It certainly didn’t look like spring.

My grandfather would always remind me that on a farm there are three distinct milestones on the farmer’s calendar: the time to plant, the time to grow, and the time to harvest. Sure enough, underneath that springtime dirt were the seeds of future growth. By the summer, when other yards were brown under the scorching sun, the farm was alive with the growth of those springtime plantings that continued well into the fall harvest.

I believe the same can be said for investments. There is indeed a “planting” season when it comes to investment opportunities. The harsh winters on a farm serve as a means to refresh the acres of dirt tired from a season of growth to get ready for the spring plantings, which is similar to how tough economic environments, stock price declines, and recessionary periods cultivate the investment landscape for the next potentially great investment “harvest.”
 
There has certainly been much to be concerned about over the last few months, which could be the “winter” that opportunistic investors have been waiting for. While the childish bickering in Washington, the concerns over the debts of many nations in the developed world, and Europe’s seeming inability to unify to find solutions to their economic challenges are presenting a significant headwind to economic prosperity, what typically comes out of challenges are opportunities.



What are you going to do with that rock?

 
My grandfather used to always remind me that one of biggest enemies of any farmer are rocks — they can damage the plow and reduce the effectiveness of the land. During the spring, when most kids were on an Easter egg hunt in colorful flower beds and green yards, I would have a different game that I would play with my grandfather in those dirt fields. Instead of eggs, we would go on a search for rocks.
 
Click here to read the rest of Burt's article.