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Watch Out for the New Fees

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Another new year is underway, and once again consumers need to be on the lookout for new fees. Some of the fees are hard to miss, but a few of them are more subtle.

Here are several of the more obvious fees to monitor:

  • The Dodd-Frank financial overhaul bill has limited the amount banks can charge on debit card transactions, so expect new fees on debit cards and banking services. Bank of America is already charging an $8.95 monthly maintenance fee on many checking accounts. The bank is preparing to roll out a pilot program that will offer consumers a tiered system with a variety of fee options. With one option, you can avoid a fee by using a linked credit card once a month. This isn’t an inactivity fee on a credit card, but it has the same result.
  • Don’t be surprised to see annual fees popping up on debit cards as issuers scramble to get back the revenue they lost on transaction fees.
  • Interest rates are increasing, and while this isn’t a “fee,” it represents higher costs to the consumer. This is a sign that issuers are getting nervous about lost revenue and will be thinking about new ways to get back lost profit in 2011. Translation: More new—and possibly very creative—fees this year.
  • At the end of 2010, consumers started being asked over the phone if they’d like a “payment protection plan.” These plans offer benefits, such as suspending minimum payments for a short time, in case you can’t work for some reason. But they’re not cheap—charges range from 87 cents-95 cents per $100 dollars of debt you have. This is usually promoted over the phone and some consumers were charged these fees without being aware they’d signed up.
  • Issuers started charging fees for paper statements in 2010 and more have begun doing so. Consumers need to read their statements every month and make sure they’re not being charged for fees like this. Issuers are trying to lower costs and this is an attempt to transfer the “costs of doing business” to the consumer.

Here are some of the more subtle approaches. They aren’t outright “fees,” but the result is that you pay more. In particular, you need to read the details in rewards programs.

  • A common prediction for 2011 is that rewards program will be getting stronger. But they’re also getting more complex. This is the perfect environment to sneak in “rules” that don’t appear to be fees. For instance, inactivity fees are banned, but consumers have to watch for the ways issuers get around this. The new Citi ThankYou rewards credit cards require a purchase at least every 12 months or rewards expire. This is just another approach to an inactivity fee. You don’t use the card, you lose something of value. (Read: Citi Revamps it Rewards Cards.)
  • Another subtle way that issuers are increasing revenue is to change the “basics” of rewards programs. Southwest Airlines is changing its Rapid Rewards program. The new program will be based on the value of the fare as opposed to the frequency the consumer flies. Result: Consumers will have to spend more to get rewards. (Read: The Lowdown on Southwest Airlines New Rewards Program.)
  • Some issuers are also adding “reinstatement fees” with rewards programs. In this case, if a consumer is late with a payment, a fee is charged to get back the rewards you’ve earned.

I don’t want to sound all gloom and doom, so here are a few positive things I’ve seen from issuers lately:

  • Issuers are sweetening balance transfer offers. Discover has eliminated the balance transfer fee on this Discover More Card until February 28, 2011. It’s a significant move because the fee was 5 percent, which was at the high end for these fees.
  • A few credit cards have eliminated foreign transaction fees. Capital One has never charged these fees and now Citi has removed the fee from some of their cards. In September 2010, Chase introduced its new Hyatt Card and listed “zero foreign transaction fees” as one of the key features of the card. And then at the end of 2010, Chase eliminated the foreign transaction fee on its British Airways Visa Signature card. Even more recently, American Express announced that they plan to get rid of the fees for its Platinum Cards® and Centurion® Cards in early 2011. Too soon to be seen as a trend, but it’s something positive for consumers.

Image: Hey Paul, via Flickr.com

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