The financial turmoil brought on by the pandemic sees no end, specifically in regards to bank and credit card fees. In an industry topping $200 billion annually, bank fees and credit card interest have found themselves in a game of tug of war between consumers and their financial institutions.
For consumers, these fees have skyrocketed like never before. Last year, average bank fees charged by financial institutions jumped 79%, and overdraft fees grew about 170%, according to Cushion. Banks, however, are in a similarly difficult position. Forced to slash fees and offer rock bottom interest rates to aid economic recovery, they’re on the hook by shareholders to tap into tried-and-true profit drivers while also finding new and innovative ways to recover last year’s lost revenue. One major bank has already sent emails to their customers stating they’d increase the maximum charge for late payment fees and return payment fees in April.
Luckily, Cushion saw a dip in fees at the beginning of 2021, which we have attributed to the second round of stimulus checks and an improving unemployment rate. But the question remains: What does the future hold for bank fees, and is it safe to assume they will continue to decrease?
A word to the wise—don’t get too comfortable. Because financial institutions had to offer low rates for mortgages and lines of credit in 2020 and received a lower yield on loans, we expect the effects to trickle down to customers this year, likely in the form of fees. As banks work on ways to improve their bottom line, there are several things that you can do to ensure your finances are not negatively impacted.
Keep an Eye Out for Fees
Even on the off-chance financial institutions decide not to increase fees, we expect the total number of charged fees to grow. A new stimulus check may buy you some time, but it won’t be long before fees continue trending upward as they did throughout the latter half of 2020. Whether it be through insufficient funds, excess activity, or overdraft fees, there are several avenues through which banks can stick you with a penalty.
You should also be on the lookout for hidden fees. Terms of service are already complex, often allowing customers to accrue fees without knowing. When a financial institution makes changes to their terms, these updates are sent via traditional mail or hidden behind vague emails—either going straight to your spam folder or included in the skim-worthy text. Unfortunately, many customers don’t take the time to read the fine print and end up blindsided or completely unaware as fees pile up on their account.
Ask for Refunds
Even though banks are charging more fees, they’re also becoming more generous with refunds, which poses the question: Why don’t they just charge fewer fees? Well, financial institutions are banking on people not asking for refunds—no pun intended. By not challenging your bank, you are leaving money on the table.
We get it. You don’t have time to pick up the phone to speak with a bank representative, but that doesn’t mean you should give up on pursuing refunds altogether. Services powered by artificial intelligence can assist you with bank and credit card fees of all kinds by safely scanning your bank accounts and credit cards for past and future fees. All you need to do is sign up and, for a small price, they will negotiate with your bank, dispute fees and penalties, and secure your refunds.
Reassess Your Spending
If overdraft fees, interest charges, and other penalties are causing you financial distress, try getting to the root of the problem. Often, creating—and sticking to—a budget is the first step toward a financially healthy future. Reducing waste is another effective solution, whether that means adjusting your overdraft protection status, negotiating your monthly bills, or cutting out unnecessary costs altogether. By being strategic about your spending and how you use your bank accounts, there is a lower chance that your financial institution will be able to use it against you by charging fees and interest.
There are many signs that banks are changing their approach to charging fees, and customers of all income brackets need to be wary. In a Cushion survey, around 87% of people viewed saving and reducing debt as top priorities in 2021. To set yourself up for financial success, it’s important to prepare for updates, pay close attention, and be proactive about asking for help.