Let’s burn some rubber

Ah, the bounced check notice. There’s nothing like coming off the road to find one – or more – such love notes from your bank waiting in the mailbox. And banks are more aggressive than ever in in making you pay for your errors.

The latest Bankrate.com survey shows that the average bank’s overdraft fee, $27.04, is back near its record high. To make matters worse, an increasing number of banks are using a tiered structure for overdraft fees, says Greg McBride, senior analyst for Bankrate.com. That means the fees go up as more checks bounce, usually starting with the second check.

“Some of the bigger banks are now instituting the policy nationwide,” he says. “It used to be something we’d see only regionally.”

Also, some banks have developed keen memories – where it helps them. If you bounced a check up to 12 months ago, your next mistake will trigger the tiered rate.

Add in a merchant’s penalty for a bounced check, and the total cost for one overdraft can exceed $50. Better to invest your money in the kind of rubber that meets the road. Here are some tips for not tipping your bank:

MONITOR YOUR ACCOUNT. Record every check as soon as it’s written. Don’t forget debit card purchases. Develop a system for logging automatic monthly drafts, such as for utilities, whether it’s a note on a calendar or a future entry in your checkbook.

USE OVERDRAFT PROTECTION. Most banks offer this service, which automatically draws from your savings or credit card account to cover a bad check. If savings, you obviously need to keep a good stash to make it work. If linked to a credit card, “that’s a less favorable option because then you’re paying interest,” McBride notes. Still, $5 or less for the transfer fee plus a little interest beats $27.

GET ONLINE ACCESS. Even if you don’t pack a computer on the road, once you’re signed up at your bank or credit union for online access, you can check your balance and cleared checks anywhere you have Web access. If you forgot about a check there’s a chance you can spot the problem in time.

USE A CREDIT CARD INSTEAD. Considering the risk of creating long-term debt that you’ll pay for at double-digit rates, don’t use this option unless you’ve proven that you can use credit responsibly.


GOING UP
If you think that ATM fees for non-account holders keep going up, well, you’re right. The fee now averages $1.60, based on the latest Bankrate.com survey. And 98 percent of banks that own ATMs are charging a fee, usually $1.50 or $2.

Considering that your own bank also might charge a fee for going out of network, “One ATM withdrawal can easily set you back three bucks,” says Bankrate.com’s Greg McBride.

GOING DOWN
For checking accounts that return no interest, the monthly service fee has actually dropped, according to Bankrate.com’s survey: from $3 last fall to $2.80.

It’s not the first time. The fees reflect a trend of banks offering free checking, McBride says, so if you’re still paying for checking, look around for a better deal.

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