Be Wary of Free Banking Offers: They are a Myth

As a consumer, you are always looking for a good deal.  With more and more banks offering free bank accounts, it might be very tempting to take advantage of these offers to avoid paying the monthly service you are currently paying each month for the account you currently hold.  Just because a banking institution claims that they are offering free banking does not mean that these claims are necessarily true.  Financial institutions who offer free checking accounts must make money somewhere because they are for-profit organizations.  This means that consumers need to educate themselves on possible hidden charges they may be assessed before they are enticed to open an account.  Read on and find out how free banking offers are really a myth and how they may end up costing you as much as $1,150 a year.

Money Collected From Accounts in Good Standing

You have to consider just how much money the institution is going to charge you for services that should be included in your account for free.  Research shows that a number of the financial institutions who are offering free banking are charging their existing account holders a pretty penny for services, even when they are in good standing.  You would expect that you could conveniently access your money when you have an account without being penalized.  The problem is that the banks are charging their customers as much as $20 to make two $130 cash withdrawals and two $65 direct debit card payments.  If you withdraw on a regular basis, this could add up to hundreds.

Overdraft Protection is Actually a Way to Charge Consumers More

If account holders who keep their accounts in good standing are being charged hidden fees, you can just imagine how much account holders who go overdraft are charged.  There will be times when you will balance your account wrong and you will have a negative balance.  When your account goes negative, the bank will charge you fees for being overdrawn.  Even account holders with overdraft protection will be penalized.  Charges for those without overdraft protection can charge you between $155 and $1,150 per year without your permission.  With overdraft protection, you can be charged as much as 19.99 percent interest and still pay a fee for transferring the money from one account to another.  Even though overdraft protection is designed to help you avoid fees, you can end up paying extremely high fees even when you try to stay protected.

Make Sure to Have At Least the Minimum Balance

You need to read the terms and conditions of any bank account before you open an account with free services.  Some banks are now getting away will charging hidden fees to their account holders when the account goes below a minimum balance.  These extra charges can add up each time that you go below that balance and turn your free account into a very expensive account to maintain and keep active.

As you can see, free banking offers are certainly a myth.  These for-profit banks are looking for a more creative marketing scheme to earn money and in doing this, they are taking advantage of their consumers and taking their money.  If you are looking for a new account and you have been taken advantage of, you may want to consider opening an account with a credit union.  Credit unions are not-for-profit institutions and they are generally very upfront about the fees they do charge.

Byline:

Susan Johnson realizes the benefit of being the first to know about news and tips, whether they are finance, entertainment, or health-related.

Be Sociable, Share!

Comments