BETTER THAN
PENNY-WISE
10 ways not to get
nickeled and dimed
PART I

By MARY ANNE COLE

“Watch the pennies and the dollars will take care of themselves.”

veryone has at least one New Year’s resolution every year — year after year — that has to do with weight and exercise and another that has to do with money.

Where money resolutions usually fall short, though, is that they tend to be vague. “Spend less” and “save more” don’t usually translate to any real action because they’re just not specific enough.

There are 10 easy changes that can each save you a little but add up to a lot. We’ll present five in this issue and five in the next issue so you can make 2008 the year you resolve not to let your bank or your credit card company nickel and dime you to death.

1. Get overdraft protection on your checking account.
Even if you’re not 25 anymore and don’t tend to bounce many checks, we all make mistakes. Overdraft fees from banks range around $20 to $30, and if your bounced check was written to a merchant, you may be facing another $25 fee from them. This is a crazy waste of money and time since overdraft protection is available and often costs nothing. Link your checking account to another account you have with the bank — a savings account or a credit card — so your checks will never bounce. But try not to get into the habit of using overdraft protection for anything but mistakes. Taking money out of your savings account for daily spending is a good way to deplete your savings account. And overdrafts that are charged to your credit card are just like a cash advance; they have no grace period and begin accruing interest immediately, sometimes at higher rates.

SAMPLE SAVINGS ON
TWO BOUNCED CHECKS
PER YEAR: $80

2. Avoid late fees by setting up automatic payments.
We’re all busy, and finding time to pay bills isn’t always easy. Late fees on your recurring bills (mortgage, utilities, water, phone, credit card, homeowners’ association and so on) can add up quickly. According to Money Magazine, credit card companies, knowing a good source of income when they see one, have nearly tripled their late fee charges from what they were in 1994, and now late fees average around $32. What’s worse, if you usually pay your credit card balance in full each month, they’ll tack on interest for the full month. Paying even one late fee to a credit card company or other creditor is just throwing money away, so set up as many automatic payments as you can — charged to your credit card or paid automatically from your checking account. If you slip rarely — say, no more than once a year — it’s worth it to call the credit card company and ask to have the late fee and finance charge waived; they’ll usually do it.

SAMPLE SAVINGS ON ONE
LATE CREDIT CARD
PAYMENT AND ONE LATE
HOMEOWNERS’
ASSOCIATION PAYMENT
PER YEAR: $90

3. Avoid ATM fees.
When ATMs first appeared, withdrawals were often free and were seldom more than a dollar. But now some are as much as $5, what the Consumer Bankers Association refers to as “the price of convenience.” Since the fees aren’t based on how much you withdraw, people who withdraw small amounts of money — $20 or $30 — are paying a tremendous percentage for this convenience. Even a comparatively small $1.50 ATM fee is a 7.5-percent surcharge on a $20 withdrawal. The best solution is to find a bank, like USAA Federal Savings Bank right here in San Antonio, that rebates ATM fees from other banks’ ATMs, up to a certain number of transactions each month. Alternatively, if you must use an ATM that charges a fee, limit the number of times you use it. For example, instead of withdrawing enough cash for a week, withdraw enough for two weeks.

SAMPLE SAVINGS ON 40
ATM TRANSACTIONS PER
YEAR AT $2 PER
TRANSACTION: $80

4. Don’t pay annual fees on credit cards.
The idea of a credit card company's charging you a fee to let them make money from the retailers you use is truly inspired. Some cards pile on extra features — travel protection, rental car insurance coverage, warranties on purchases, travel “concierge” services, and so on — to help you feel the annual fee is justified, and if you actually use these features, it may be worth paying the fee. But if you’re not even particularly aware of these extra features and never use them, you might be better off with a card that charges no fee — and there are plenty of those to be had. Even if you pay a fee on a card for a feature you like, such as cash back or airline miles, you may have to do a little calculating to be sure it’s worth it. Should you pay $150/year for a credit card with airline miles if it takes you three or four years to earn enough points for a domestic coach flight?

SAMPLE SAVINGS ON
ANNUAL FEES FOR
2 CREDIT CARDS: $100


5. Don’t pay transfer fees on credit cards.
If you happen to be saddled with a lot of credit card debt, you may be tempted to respond to some of those limited-time lower-interest-rate transfer offers. “Pay 3.9 percent until June 2008!” Should you do it? Not before doing a little calculating. Say you have $10,000 of debt on a credit card and you’ve already called (as you should) and negotiated a fairly reasonable interest rate of 9.9 percent. You’re paying as much as you can on the credit card — say, $300 each month.

Should you transfer that $10,000 to get six months at 3.9 percent? Not if there’s a transfer fee and not if the rate rises higher than your current rate after the six-month teaser period. Most transfer fees are 3 percent, so right away your balance will rise to $10,300. At the end of the six-month teaser period, your balance will be about $8,690. Had you left the debt where it was, your balance would have been about $8,670. If your new card’s rate now rises to higher than 9.9 percent, you’ll be worse off than you would have been if you’d just left it alone — and you’ll have to pay another transfer fee to move your balance to a lower-interest card. If you really want to transfer a balance from a high-interest credit card, watch for transfer offers that don’t charge a transfer fee.

SAMPLE SAVINGS ON
TRANSFER FEES ON A
$5,000 BALANCE: $150

So we’re only halfway through our list, and already we’ve racked up $500 in savings — enough to get a good start on next year’s holiday shopping!
Be sure to check back in the next issue for five more great ideas for small savings that add up big.