Business - On the Money Beyond overdraft fees, other charges to watch for

By Candice Choi AP Personal Finance Writer NEW YORK (AP) -- Overdraft fees seem to provoke blind outrage. So much so that it's easy to forget all the other fees banks charge. Under a new law that goes into effect Thursday, customers will need to give their consent before banks can sign them up for overdraft coverage. The idea is to prevent surprise penalty charges -- often as steep as $39 -- for those who didn't realize they were enrolled. Most banks have already adjusted their policies. So now is a good time to take stock of the latest changes on all the other fees that can catch you offguard. Below are some of the more common fees for checking accounts and credit cards. ---------- Checking Accounts Overdraft Fees Let's start with overdraft fees, which seem to cause so much confusion. There are a few ways to overdraw an account, but the new law only applies to overdrafts linked to debit card purchases and ATM withdrawals. If you opt in for overdraft transactions to clear, there's still no limit on the amount or number of times you can be charged a penalty. Once you opt in, you still won't be alerted each time you're about to overdraft either. The new law also doesn't apply to overdrafts by check or automatic bill payment; banks can still cover those expenses and charge the customer a penalty fee without their prior consent. The thinking is that those payments are usually for important bills, such as rent, that most people want covered. The way overdraft protection works depends on the bank. At Citi, customers can use a linked savings account as backup for an overdrawn checking account. A $10 fee is triggered whenever money is pulled to cover an overdraft. Some banks also offer a line of credit to cover overdrafts. There's usually a fee each time credit is extended, along with interest charges on the amount credited. Maintenance Fees Some checking accounts charge a monthly maintenance fee if you fail to meet certain conditions, such as keeping a set minimum balance. This is expected to become more common as banks look to recoup lost income from overdraft fees. Case in point: Wells Fargo is getting rid of its free checking accounts starting July 1. New customers will instead be charged $5 a month unless they meet balance requirements or set up direct deposit. Bank of America is also testing new fee structures. The company hasn't disclosed the details, but says the changes should be in place by next year. ATM Fees As most know, using an out-of-network ATM usually triggers two fees -- one from the ATM operator and another from your bank. But these fees have been climbing and may be higher than you remember. The average combined cost was about $3.50 last year, compared to about $3 in 2007, according to Bankrate.com. ---------- Credit Cards: Inactivity Fees Here's one fee you no longer have to worry about. Starting Aug. 22, new regulations will ban banks from charging inactivity fees. The fees can't be disguised either. For example, an annual fee that's waived if you spend a certain amount is still an inactivity fee. Banks still hold the trump card though; they can simply close an account if it's not used enough. Late Fees The new regulations in August also limit penalty fees to the amount of the violation. So if you're late on a $15 payment, the late fee can't be any more than that. And the maximum late fee allowed is $25. An exception is if you have a second violation in six months; then the cap rises to $35. You also can't be charged more than one penalty fee for a single violation. Over-the-Limit Fees As with overdraft programs for checking accounts, consumers must now opt in if they want transactions to be approved even after they've used up their credit limit. The fee for an over-the-limit charge will also be capped at $25, unless the bank can show a higher fee is warranted given the size of the violation. Reward Program Fees Credit card issuers sometimes freeze or take away rewards points if you're late on a payment. There could then be a fee to have the points reinstated. At American Express, for example, it costs $29 to restore lost points. Such fees aren't subject to the new $25 fee limit because they're not considered penalty fees; cardholders can choose not to pay them. Service Fees In the past year or so, banks have hiked fees for balance transfers, cash advances and foreign transactions. For balance transfers and cash advances, fees have climbed from about 2.5 percent to as high as 5 percent. Note that the interest rate on a cash advance is usually significantly higher than for purchases too. On a Bank of America card, it's 24 percent versus 13 percent. Banks usually don't set a cap on balance transfer fees either, although credit unions sometimes do. So if you're transferring a $5,000 balance, a 4 percent fee would be $200. If you travel internationally, using your card probably costs more than you remember too. Foreign transaction fees are now around 3 percent of the transaction, compared with 1 percent to 2 percent a couple years ago. If you have more than one card, it's worth checking if one offers a lower rate than the others. Published: Fri, Jul 2, 2010

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