Thursday, Oct. 02, 2008

Banks expected to raise customer fees after mergers

If your bank is buying the competition or selling out to them, you may want to add the words “higher” and “fees” to your banking vocabulary.

Financial institutions will likely “use this as an opportunity to raise everybody’s fees,” said Ed Mierzwinski, consumer program director of the U.S. Public Interest Research Group. “This wave of mergers will result in bigger banks, and all our studies have shown that bigger banks have bigger fees.” In September, Charlotte-based Wachovia — South Carolina’s largest based on deposits — was bought by Citigroup in a deal brokered by federal regulators.

While such fees can range from charges for replacing a lost ATM card to returning your paper checks, one big one to watch out for, said experts, is fees levied against your account when you bounce a check or when the bank covers overdrafts — purchases, withdrawals or payments you make with not enough money in your account to cover them.

Consumers pay at least $17.5 billion a year in such overdraft fees, said Jean Ann Fox, director of financial services for the Consumer Federation of America, which is “big money” and the amount of those fees has been “steadily increasing.” The average high is $37.50, up 15 percent from 2005, according to a federation survey of overdraft fees and practices.

What she said consumers should also know:

-Banks don’t warn you as you’re making a withdrawal or debit card purchase that doing so may trigger an overdraft.

-Of the 10 large banks in the survey, six had no cap on the number of overdraft fees they would charge a customer in any given day.

-If you don’t get money into your account fast enough to cover the overdraft, as well as the fee, you can get slapped with further fees.

-Especially vulnerable are “cash-strapped consumers, struggling to keep up and keep enough money in their checking accounts,” said Fox. But banks are allowed to charge new fees or increase existing ones, she said, as long as they let consumers know, even if it’s in very small print.

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