Nothing comes free of cost-at least not anymore. While most of us are familiar with overtly advertised charges by banks and lenders, there is a plethora of hidden interest charges that we as a common man may be unknowingly subjected to. From ATM fees to overdraft fees to huge maintenance fees, banks have a multitude of ways for extracting money from their customers. For example, you may go to an out of order ATM and still be charged a minute amount that may not seem substantial but could actually amount to a significant amount in the long run.
Junk fees contribute to a massive chunk of overpriced goods and services and consumers have only recently started realizing the impact they may be having on their budgets. Before markets become too accustomed to these vague charges, often in fine print, we must actively seek out the benefits of direct competition amongst suppliers of these goods and services to choose the best possible option for us as customers that offers both transparency and lower interest charges.
Team EZ Wage has compiled this concise list of hidden interest rate charges to financially educate the masses so that the next time someone incurs additional bank fees, ranging from basic inactivity fees to early closure fees, they are in a position to recognize them and ask in-depth questions about them.
1) Late Payment Charges on Credit Cards
Banks usually charge a flat fee to credit cardholders if they are unsuccessful in paying the minimum due amount timely. Late payments have a direct bearing on the credit score. Furthermore, paying only the outstanding minimum dues doesn’t fully solve the problem at hand. Credit cards still invite double-digit interest on both the unpaid amount as well as ensuing charges, which continue to persist until the entire escalating amount is paid off. Therefore, while it may seem like the interest percentage is low, pay off your outstanding dues timely to avoid the interest rate spiral of credit cards that often leads to the quicksand of credit card debt for many!
2) High fee ATM charges
Banks are private institutions and fare off end fees charged to customers for their services. While it is understandable that the cost of installing and maintaining ATMs is high along with other involved costs such as inter-bank transfers, paying employees etc., one can question if the banks are being overly aggressive in their strategy of charging people for managing their money and accessing it. Small examples of fees that may look like nothing but amount to a lot include receipt printing fees, ATM fees, insufficient funds fees, service charges specifically stop payment charges. It is hence advisable to do a thorough research and switch to offers that benefit you as a consumer. Try finding banks that charge lower fees and reimburse out-of-network ATM fees. Checking account fees should also be considered in this decision. Always go to ATMs that are in your network to avoid additional hidden charges. While the chances of finding high-fee ATMs on premises near running restaurants and malls are high, try keeping spare cash in hand or going over to ATMs that are in your network to avoid unnecessary costs. Always think ahead and opt for debit cards and checking accounts that have the option of many ATMs in your vicinity or find those that offer reimbursements for out-of-network fees.
3) The Opaque Market of Student Loans
The privilege of attending fine institutions for education comes at a heavy cost and this is something that the student loan lenders have benefited from over the last decades. As the lenders’ policies become more stringent and disclosures on lending practices become less and less transparent, it is essential to pause and research before signing up for students loans. For example lenders might not fully disclose all the fees charged for the entire process of servicing and then collecting student loans. It is also prudent to realize that promises that are used to lure in students might not be written officially in the contract such as the possibility of lower interest rates after graduation that lender advertisements assure students of. Naïve students are also asked to sign permissions to pay off loans before the entire contents of the interest rate charges are disclosed to them. It is advised to not fall for the brand name of the advertising lenders but to research the interest rates being offered by their competitors beforehand.
4) Beware of Early Closure Fees
Closing off your bank account, particularly savings accounts, has its repercussions that you might be unaware of. With some banks you are obliged to pay early closure fees if less time has lapsed between opening the account and then closing it. This holds true for savings account mostly which store your money for a fixed term and earn you profit on interest. It is advisable to have a look at the fixed fee eligible on closing such accounts beforehand and in most cases also the interest rate based on the amount in your account, where you might be asked to pay back in full any interest you might have earned during that time.
As always our final advice would be to read the fine print about the little costs that you might be hit with while making financial decisions especially those related to the banking industry in order to safeguard yourself against hidden charges. Remember financial literacy is the key to financial freedom and every cloud that comes with a silver lining could have hidden thunder!