Fees Still Lower at Credit Unions

The Federal investigations of fees will not exempt credit unions, but we members can sleep more peacefully knowing that we are less gorged by fees than our banking friends.

The latest research comparing the fees on deposit products between credit union and bank customers by Researchers Victor Stango, a professor of economics at the University of California, Davis, and Jonathan Zinman, a professor of economics at Dartmouth College, report the following key findings:

- Average annual costs on bank checking accounts are more than twice as high as those on credit union share draft accounts.

- Some of the bank/credit union difference can be explained by a greater number of fee-incurring transactions on bank checking accounts.

- The greatest component of annual costs of both bank and credit union accounts is the overdraft fee, which is roughly one-third lower at credit unions.

Nobody likes to pay fees at a financial institution (FI) or anywhere else. Fees have always been around and were originally intended to discourage certain behaviors like paying bills late, spending more than is in your account or using another financial institutions ATM. But most FIs learned early on that fees were also a great way to make money. So they literally cashed in on consumer behavior. Over the years FIs found even that increasing the amounts of the fees didn’t change our behavior much, we still did all those things that trigger fees. So the FIs kept raising fees for easy profit. Now with profits shrinking in other areas of their business, fees have come to be looked on as even more valuable.

Debit Card Overdraft Fees Getting Federal Attention

The Federal Reserve has had it with fees on debit card ATM and retail transactions. Banks have been allowing consumers to withdrawal more than their account balance and/or make purchases that cause their account to overdraft. These banks then charge the consumer significant overdraft fees.

I’ve always been a big fan of debit cards, since I never carry cash. I like that the money comes directly from my account and isn’t loaned to me on credit. But, lately there’s been a bit of stretching of the debit card function. Some banks allow consumers to draw more than the balance of their card and let purchases overdraft all with the intention of collecting fees. If you ask them, they’ll say they are just being nice, but if you ask the Feds they’ll call it something quite different.

Fortunately, your credit union debit card has not been a part of this. Your credit union debit card is a true debit card. Your spending power is confined to the amount of money in your account. There aren’t any sneaky practices to drain you of your hard earned money.

But the practice isn’t going away. Now consumers will be notified that they must opt-in to allowing overdraft transaction (which would then cause a fee to be issued). So for those of you who like to add $32 fee to your $4 overdrafted specialty coffee purchase, just say “yes” to fees. For me I’ll stick with the credit union honest debit card.

Credit Card Fees to Make You Feel Special

This offer came in our mailbox a few days ago.

We should fee special for receiving this offer, it's limited to only 1% of U.S. residents. It comes with:

• 24 Concierge Assistant,
• Exclusive Rewards Program ,
• Luxury Gifts, and
• it's made with carbon!

It also carries a $495 annual fee! (Except if you live in Iowa, then it's just $0.50--state regulations.)

Consider the benefits:

Concierge Program: These programs are useful and busy people may like the idea of having someone take care of reservations at restaurants, golf courses and theatre shows, but it's not something we are likely to use.

Rewards Program: The card gives you 1 point for every dollar spent (cash advances are excluded). Rewards expire after 5 years. This isn't bad, but we already receive similar rewards with another card. And there are rewards earning cards available that have $0 annual fee.

Luxury Gifts: I have no idea what these are since no examples were given.

Black Carbon card: It's pretty, but not enough to sway me.

So, nearly $500/year to carry a black Visa? No thanks. I'll run with other 99% of U.S. Residents who don't carry black either.

To Check or Not to Check

photo by hoyasmeg

Some friends and I were lamenting the woes of the new in your face fees from airlines. I say "in your face" because really do they need to be so blatant? We all get it that fuel prices are climbing so anyone who can do common math understands that this also effects how much we'll pay to fly. Right?

Okay, I haven't exactly been watching ticket prices closely so I can't comment on how much they've gone up. But it just seems like poor strategy to break out fees for things such as bags. Nearly everyone who travels is going to bring something on to the plane. I guess punishing travelers who check a bag seems fair to those who don't, but why not just spread out costs among travelers and stuff it into the ticket price? The majority of those that don't check a bag are squeezing something into the overhead bin, thus still adding to weight and fuel consumption. Sorry, I've started ranting.

So back to the conversation...

What if instead of checking that first bag for $15 and a second for $25 (though I don't know why you need a second bag, just do laundry) you shipped all your stuff to your destination? Could work for vacations. And it would be nice not to haul luggage around. Heck, you could even have UPS or FedEx pick it up at your house.

Well, I decided to explore this option and did some online estimating. I used quick estimators for both companies. I plugged in travel from my home in Colorado to my friend's house in Malvern, PA and used a package size of 25 lbs. Here's what I got:

UPS Ground = $29.44

FedEx End of day (3 Business Days ) = $20.85

Either way not such a great deal over the $15 first bag fee.

P.S. For the above estimate I used "schedule a pickup" for both companies. I went back to see if the price would change by how I sent the package. It did!! If I drop my FedEx package off at FedEx staffed location the bill goes UP $5.00. If I use a self-service location it goes DOWN $2. If I use an authorized FedEx shipper it goes UP $3.00.

Credit Card Companies Slap "Good" Customers

So you pay your credit card bill on time and in full each month. Well good for you, but not everyone thinks you're so great. The company that issued your credit card liked you in the beginning because you might have had good credit. To them that means low risk. But spring time in relationships is short. After long periods of you not carrying a balance, they are a little tired of not making money off you. You are now looked at as a "freeloader". So guess what, dear, they've come up with a way to squeeze some money even out of you.

These are a few fees that "good" cardholders like you might feel:

Magically Appearing Annual Fee: You may have signed up for a card with no annual fee, but since they can't get any other fees out of you they suddenly create a new policy. This hits you with an annual fee.

Disappearing Grace Period: This might also come as a change in policy. Remember, if your grace period is eliminated or shortened, you'll accrue interest from the day you make a purchase. The only way to avoid a finance charge would be to pay your bill before you receive it.

You might not realize these changes have been made if you don't pay close attention. By law anytime a policy or terms change is made the company must notify you IN WRITING. Typically it's mailed, sometimes it's emailed. Other times it's an electronic document accessed through your online account. In this case you'll receive an email that directs you to go look at your electronic documents. All companies will send notices via whatever is the most cost effective way that meets the minimum notification requirements. You could miss it, but that's you're problem.