Financial fees can sneak up on you and be quite unpleasant. The financial industry’s fees can come in any shape form or fashion. We may recognize most of them but some can catch you off guard. Fees aren’t all bad because obviously workers in finance have to earn money somehow.
You should know the amount you are paying for services from a financial adviser. Research how they get paid before you hire one. If they don’t directly answer the question of “how they make their money”, you should reconsider your financial advisor choice.
Avoid paying sneaky financial fees you should never have to pay and your financial future will look brighter.
1. Mutual Fund Loads. You may find that several mutual funds have loads. Class A shares are an example of a mutual fund that requires a commission upfront. After paying this, you may notice that you are also being charged a long-term management fee (expense ratio). Those fees add up to quite a bit of money.
2. 12b-1 Fees. A 12b-1 fee is applied every year. This is a distribution or marketing fee. It is included in the fund’s expense ratio because it’s considered to be an operational expense.
Never pay marketing fees. A mutual fund should sell itself, not be marketed. If it is being marketed, it may not be a good or reliable fund.
3. Variable Annuity Fees. If you are paying variable annuity fees, it may seem like it’s not that much at the time. Many companies are great at sneaking this fee on you and they could have you paying over $3,000 and you could not even know about it.
4. Late Fees. You should never pay late fees. If you are late on a payment, you could be charged a late fee. To avoid these fees, make sure each month you have enough money to pay ALL of your bills.
Make sure you organize any automatic payments you have so you know when and how much is going to be taken out of your account each month. Having enough money is important each time a payment is taken out so you can pay on time and avoid late fees.
5. Overdraft Fees. You should never pay an overdraft fee. An overdraft happens if you do it on purpose or do not monitor your transactions. Always keep extra money in your checking account to avoid this. Check out this article to learn how to avoid overdraft fees.
Money will be taken out of your checking account, rather than making it negative and resulting in an overdraft fee, if you forget about a transaction you made. Set up an online checking account to automatically withdraw from your savings account if you need that extra money in your checking account for something else.
6. Foreign Transaction Fees. Some banks and credit card companies can charge fees when you make a transaction overseas. If you are traveling overseas, make sure your credit card company doesn’t charge for foreign transactions.
7. Low Balance Fees. Many companies such as banks, wealth management firms and credit unions will charge you a fee if your balance reaches a certain low balance. Some companies will reward you with a higher interest rate or other opportunities if you take part in these types of accounts.
Paying a low balance fee is something you should never do. If you aren’t sure you can keep the minimum balance in your account at all times, you should try a fee-less account.
8. ATM Fees. ATMs will charge you a certain amount of money every time you make a withdraw. $1.50 is usually the fee if you take out $20 for example. That is a 7.5 percent charge.
Instead of paying these fees, ask your bank if there are any ATMs in your area that don’t have these surcharge-fees.
9. Payment Fees. Sometimes you can be charged for making a payment. Some merchants charge you when you make a payment through the phone or store representative. Try to avoid having to pay in addition to already making a payment.
10. Inactivity Fees. If you have an account you’re not using, get rid of it. Most banks and credit companies charge an inactivity fee when you don’t have any account activity. Avoid this by canceling the account or if you need the account, make small payments or wire transfers so the bank doesn’t mistake it for inactive.
The Bottom Line
Each one of the financial fees listed above can be avoided if you research before signing up for a service and put a little thought into what you are doing with your payments. Make sure to always read the fine print. Don’t be afraid to ask financial advisers and your bank’s branch manager about all of their fees.