Have you ever been hit by one of those massive credit card late fees for being a few hours late with your payment? Remember the expensive charge you received when you accidentally exceeded your credit limit?
There is little argument that fees associated with credit cards are steep. Research from CreditCards.com puts the average late fee at about $40 and average over-limit fee at $30. Once you tack on interest charges, things become expensive without much neglect. However, is your credit card statement the most dangerous financial document you receive?
Since many people have suffered the sting of credit card debt and mountainous fees for late charges and over-limit fees, the public in general is very sensitive of the costs they create. Yet, your credit card statement isn't the only thing that comes monthly in the mail. If you have bank accounts, you are also receiving bank statements.
You might be unaware, but bank accounts can have numerous fees attached. There are overdraft fees for checking accounts and minimum balance fees for interest bearing accounts. Many accounts have monthly maintenance fees as well.
Clearly, you have a lot to manage if you are going to avoid all the fees. With all the fees Americans need to manage, what hurts banking consumers more: bank statements or credit card statements?
Bank Fees Cost More than Credit Card Fees
According to research by the Chicago Fed, income banks earn from bank fees far exceeds income earned from credit card fees. Bank fees make up 56 percent of non-interest related income for banks, while credit card fees only earn financial institutions .72 percent of non-interest related fees.
Of course this isn't to say that paying your credit card bill late isn't dangerous. The Fed's analysis did not include interest charges on late credit card balances, since it is considered interest-related. However, the disparaging difference between income earned on bank fees versus credit card fees clearly shows that the average American is unaware of how important their bank statement has become.
Your ATM Card Costs More Than Credit Card Fees
Your bank statement isn't the only fee that earns banks more revenue. The Fed report also showed that 1.93 percent of non-interest income earned by banks comes from ATM fees. That's more than twice the revenue earned from credit card fees. The small charge for using the ATM may not seem like much, but it adds up quick.
Your Bank Register is More Important than Switching Banks
Unfortunately, your greatest defense against a bank fee is fastidious record keeping. You can switch accounts to a credit union or non-commercial bank, but the fees don't go away; they just decrease in size. Switching to a smaller bank also means earning lower interest rates on your accounts, which is a cost in itself.
When I first opened my bank account, my bank handed me a little booklet to record my bank transactions between my monthly statements. It was easy to keep when I was young and a deposit or withdrawal was infrequent. Now that I'm older and often make several transactions per day, the process is much more time consuming and inconvenient, but no less important.
Switching banks to find lower fees might be a good idea, but the only thing that will prevent losing money to bank fees is good, old-fashioned bookkeeping. Your old check register is one ancient piece of technology that's still useful to your finances today.
JP is the author of the money blog My Family Finances, a site dedicated to helping families make wise financial decisions. He is also an MBA and works in corporate finance.
