Why Do Big Banks Charge Fees?

Why Do Big Banks Charge Fees?

Raise your hand if you’re fed up with big bank fees. These pesky fees can put a damper on your day and a drain on your finances.

According to a 2016 survey by the Pew Charitable Trust, a full quarter of people who use bank overdraft services regularly end up paying out at least one week’s worth of wages annually. Moreover, most of these same people earned less than $25,000 per year. In other words, the people who can least afford these fees are the ones shelling out the dough!

So, why do big banks charge fees? It turns out to be a sordid tale of technology, greed, and good intentions gone wrong.

Back in the Olden Days….

Banks used to be restricted solely to brick-and-mortar buildings. No one knew what the Internet would bring.

These banks were—and still are—costly to operate. Among these costs, banks pay for bank tellers, rent, utilities, and all the expensive little things that go along with running a physical building. To recoup these costs and earn a profit, banks have two options: charge account fees or charge interest on loans.

Banks began charging more fees in tricky ways. For example, if you opened a new account at a bank, you’d often be automatically enrolled in an overdraft service. And, if you overdraw on your account, the bank would “kindly” pay the charge for you. Once this charge was debited from your account, you could be left with a negative balance and a hefty fee to boot.

Banks and other lenders also began loosening their lending standards. In the years after the Y2K scare, it suddenly became a lot easier to get a mortgage. This contributed to the financial crisis in 2008. In the aftermath, many banks began regularly charging fees.

The Dodd-Frank Wall Street Reform and Consumer Protection Act…and You

This long-winded act (commonly referred to as just Dodd-Frank) was passed in 2010 to try to prevent the financial crisis of 2008 from happening again. This act established the Consumer Financial Protection Bureau and ended auto-enrollment in overdraft services. Now, banks have to ask for permission before charging you up the wazoo with overdraft fees.

Another change was tucked away in the Dodd-Frank Act by Senator Dick Durbin, D-IL (who’s still in Congress today, by the way). The Durbin Amendment limited the amount of interchange fees that big banks—specifically, banks with assets over $10 billion—can charge to businesses. These interchange fees work like this: you swipe your debit card to pay for something, and the big bank charges the merchant to process the payment.

The Durbin Amendment ultimately slashed in half big bank revenue from merchant processing fees.  

“This impacted consumers directly, not just retailers or banks,” says Andrew Rombach, the managing editor and leader of the bank accounts review team at LendEDU. “For example, consumers might be required to spend a $5 or $10 minimum for a card swipe.”

The Aftermath of the Dodd-Frank Act

Dodd-Frank has been somewhat successful in reigning in fees overall. In 2009, just before the Dodd-Frank Act was passed, banks charged the highest amount ever for fees—$46 billion. Since the act was passed, however, fees have dropped off by nearly $10 billion and remained relatively constant.

But this doesn’t mean you’re out of danger just yet. Like a game of whack-a-mole, banks have began charging new and higher fees elsewhere in response to the new fee limits, caps, and regulations.

“Dodd-Frank also established compliance hurdles for big banks, increasing their costs. So to cover this, for example, there was an overall increase in monthly service fees over time, costing the consumer more,” says Rombach. “In short, regulation curbed some fees and ended consumer-expensive banking practices, but it also spurred big banks to raise their charges overall in light of increasing costs.”

Today, many consumers pay about $30 per overdraft charge, or even more.

To boot, banks are making it harder for you to skirt these account service fees: the average minimum account balance required to avoid these fees has gone up from around $4,000 to almost $6,500. With a change like this, more people will be hit with these account service fees each month.

What can you do?

First, it’s important to read up on how your bank account works. Much like your credit card, every savings account comes with a Truth-In-Savings disclosure. Sometimes, there may be a separate fee statement. And, just like your credit card agreement, you probably tossed this out. But, for most banks, you can still find this information online, such as Chime Bank’s disclosure.

“While a consumer could certainly spend more today in fees compared to a decade ago, it’s also entirely possible that a consumer can go the whole year without paying any of these fees on their bank accounts,” says Rombach.

“While fees have risen, there are still avenues open to avoid these fees,” he says.

In fact, knowing how fees work can help you avoid bank fees entirely, even if it means switching to a bank that doesn’t charge fees.

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7 Bloggers Share How They Stick To New Year’s Health And Wealth Resolutions

7 Bloggers Share How They Stick To New Year’s Health And Wealth Resolutions

7 Bloggers Share How They Stick To New Year’s Health And Wealth Resolutions

Lose weight. Lift weights. Stop drinking soda. Start making more money.

The end of the year is an exciting but conflicting time. For many, this is the time to make a New Year’s resolution and hopefully reinvent yourself for the better. In fact, according to the Statistic Brain Research Institute, over 40% of Americans make a habit of creating a New Year’s resolution each year.

At the same time, almost 60% of people in their twenties don’t stick to their New Year’s resolutions.

So, how can you stay committed to your resolution? We asked seven bloggers for their best tips on how to stick to your New Year’s Resolution. Read on to see what they have to say.

Commit to a short-term resolution

A New Year’s resolution can seem overwhelming. That’s why Joseph Hogue from Peer Finance 101 recommends setting a short-term goal. “It’s a lot easier to make it a couple of months than to aim for an undefined period.”

Jason Vitug from Phroogal agrees. Instead of committing to something for an entire year (ugh!), he instead does short-term challenges that often end up becoming permanent habits.

“I’ve done a few challenges, like a no spend weekend that turned into a no spend week. I’ve also done a no spend [challenge] on clothing for the entire month of March 2017. And to this day, I haven’t bought any new clothes.”

Set SMART goals

You may have heard of SMART goals—specific, measurable, achievable, realistic, and timely. Yet, somehow we still forget to make New Year’s resolutions that stick to these guidelines.

“If you haven’t been to the gym in 412 consecutive months, you’re probably putting a lot of undue pressure on yourself to say you’re going to go every single day,” says Mindy Jensen, Community Manager at Bigger Pockets.

Instead, Jensen recommends baby steps and then working your way up. “If you eat lunch out every day, and want to save money, start by bringing lunch once a week, then bump that up to twice a week.”

Find an accountability buddy—no, really!

It’s easy to fall off the rails with your new resolution if you’re the only one who cares. But if you have an accountability buddy, you’re more likely to stick with it since someone else’s success is hinging on yours as well.

Amy Rutherford from Go With Less spends much of her time in early retirement traveling around the globe while housesitting for folks in distant places. Because she’s always on the go, it’s sometimes difficult to rely on a local accountability buddy. But, she’s got a trick up her sleeve that anyone can use.

“When I need an extra boost, I set up a monthly Facebook challenge. There are usually 20-30 participants who opt in to the private groups. I always do better on the months I initiate a group!”

This year, she’s launching a new Facebook group each month where people can join, state their own goals, and receive support from other members.

Schedule your goal into your daily routine

If your goal is officially on your schedule, it becomes a priority and you’re more likely to get it done, according to Amy Savage Blacklock from Life Zemplified.

Blacklock inks in time for a new healthy habit – like walking during her lunch hour – into her daily schedule to stay successful. “I block off 30 minutes every day in my calendar at work so that I can walk during my lunch hour. This prevents others from scheduling meetings during my time and I stick to my walking goal.”

Another related trick that can work wonders is habit stacking. For example, let’s say you want to start incorporating skin care products into your daily routine so that you don’t look like the Cryptkeeper by the time you turn 40. Setting a regular, consistent, and easy time of day to do this—such as right before bed when you brush your teeth—can make the habit stick better.

Use affirmations

Affirmations are more than just crunchy hocus pocus. This is basically an opportunity to say, write, or think positive things about yourself and your goals. To boot, positive affirmations can actually help you stay on track with your resolutions.

“I have changed so many false beliefs, especially when it comes to self-worth and my abilities. Every morning one of my affirmations includes a positive sentence about how I am valuable,” says Nicole Chammas Rule from the blog Greatest Worth.

“From there my mindset begins to shift and I can feel my confidence rising.”

Rule says it’s important to continue practicing affirmations daily as this is the best way to feel the lasting effects.

Track your progress

One of the most effective ways to stick to your New Year’s resolution is to find a fun way to monitor your goal. You can use apps like Beeminder or HealthyWage to track your progress and give you a financial incentive to complete your goal.

If you prefer a more visual and tangible representation, you can even try an old-fashioned spreadsheet, says Jenny Se from Good Life Better.

“I use a simple spreadsheet that I hang someplace where I can see it. At the end of the day, I give myself fun stickers for each success. These may seem childish, but I don’t think you’re ever too old for gold stars!”

Your New Year’s resolution doesn’t have to end up in the dumpster

Sticking to a New Year’s resolution is hard. But, by following these expert tips and staying committed to your goal, you can start a new healthy habit today. With a bit of perseverance, it may become a long-term habit.

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How to Start Paying Yourself First in 5 Easy Steps

How to Start Paying Yourself First in 5 Easy Steps

How to Start Paying Yourself First in 5 Easy Steps

You probably already know that the best way to get ahead financially is to save money. Although this can seem daunting, there is an easy way to do this: pay yourself first. This means you pay yourself each time you get a paycheck—yep, before you pay your bills.

If you’re in debt or living paycheck to paycheck. you may now be thinking: there’s no way I can do this. But, fear not! It can be done, no matter what your finances look like right now. Here’s a foolproof 5-step plan to show you how to pay yourself first.

Step 1: Create a budget

A budget is important for many things, like figuring out how to cut costs and create a spending plan you can stick to. But, let’s simplify things. Think of a budget as a tool to find out just how much money you can afford to save.

The best-case scenario is that, after all your bills and living expenses are paid for, you’ll have money leftover to save. Yet, it’s also possible that you’re spending every last penny of your paycheck and don’t have any wiggle room to save.

Even worse, maybe you’re already spending more money than you earn each month. If this is the case, don’t panic—there are ways to fix this! To start, focus on cutting your expenses while also earning more money.

Step 2: Define your savings goals

You wouldn’t set out on a road trip without a map, so don’t start saving money without a mapped out plan! If you know exactly what you’re trying to save up for and develop a savings plan to get there, you’re far more likely to reach your goals.

Having two sets of savings goals—long-term and short-term—can also help you parse out how much you need to save.

Long-term goals can include things like saving for retirement. You don’t necessarily need to know exactly how much you’ll need since it’s so far in the future. But, you know it’ll be a lot, so it’s a good idea to set aside a certain percentage of your paycheck.

Short-term goals can include saving up for a vacation or Christmas gifts. You probably have a good idea of how much you need and how much time it will take you to save for these goals. Pro tip: For each short-term goal, divide your savings target by the number of months you have to save. This will tell you how much you should be saving each month.

For example, my family wants to spend $500 each Christmas. So, we set aside $45 per month starting in January so that when November comes, all we have to worry about is spending the money!

Step 3: Automate your savings

It’s easy to put off making a bank transfer each month from your checking account into your savings account. There are always excuses you can come up. Trust me; I am the excuse master.

Instead, take the control out of your hands. Schedule a recurring transfer each month into your savings account. If you schedule the transfer right after you get paid, you won’t even miss the money.

Consider a bank account that helps you pay yourself first automatically like Chime. Chime’s Save When I Get Paid feature deposits 10% of your paycheck into your Chime Savings Account every time you get paid.

No more excuses. It’s time to do this!

Step 4: Watch your bank account

It’s a good idea to keep an eye on your bank account, especially as the end of the month nears. This is when funds are often running low. You may not be used to cutting back on your spending and sticking to a budget, and besides, unexpected expenses always pop up.

One thing you don’t want to have happen is an overdrawn account. So, watch your bank account. You can even make it easy on yourself by setting a reminder to check your account each day, or download an app such as Mint that’ll give you quick snapshots of your bank account and budget.

If you bank with Chime, you can choose to receive a daily balance notification so that you start each day knowing where you stand.

Step 5: Stay one month ahead on expenses

The easiest way to make sure you pay yourself first every paycheck is to get one month ahead on your expenses. I know – it’s easier said than done. But, you can do this.

To start, treat this like a sort of savings goal on its own and start saving more than you have to for your expenses. You can even factor this into your budget.

Getting one month ahead on your expenses is an all-around good idea as you won’t fret about making ends meet or incurring hefty overdraft fees at the end of the month. It also protects you financially in case there’s a sudden interruption in your income—say, if you lose your job or get into an accident.

Bottom line

We know following a money-saving plan isn’t easy. But, if you follow these 5 steps, you won’t just have an automated plan to pay yourself first. You’ll have a holistic plan that will help you reach your savings goals. In the long-run, this will make your life easier. And, you can consider this free advice.

Banking Services provided by The Bancorp Bank, Member FDIC. The Chime Visa® Debit Card is issued by The Bancorp Bank pursuant to a license from Visa U.S.A. Inc. and may be used everywhere Visa debit cards are accepted.

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6 Healthy Habits That Can Help Your Finances

6 Healthy Habits That Can Help Your Finances

6 Healthy Habits That Can Help Your Finances

Who isn’t swayed by the promises of a diet? By making a temporary, albeit uncomfortable change perhaps you can hit the reset button on your weight and start to feel better about yourself.

The hidden side of this is that for most people, it’s not sustainable. In fact, about 80% of people who diet end up regaining all of the lost weight back within a year.

The same thing holds true for your money. No-spend challenges are popular, but unless you can find a way to make them stick, they are just temporary band-aids. Instead, you need to look at something else entirely—your habits.

By developing healthy financial habits, you can aim for success in the long run—not just tomorrow or next month. These 6 healthy habits will help you achieve your long-term goals.

Check Your Finances First Thing Each Morning

The things you do first thing in the morning help set the tone for the rest of the day. So, why not take a peek at your finances each morning to orient yourself? You can look at your budget numbers, or just your bank account balance if you don’t currently have a budget (though creating a budget isn’t rocket science, we promise). This way, your money will be on your mind as you make spending decisions throughout the day.

The key to maintaining this habit is to find something that works for you. Maybe you prefer to scope out your money using an app on your phone, a software program, a DIY spreadsheet, or even just old-school pen and paper. Find what works for you and keep at it.

Set Up Automatic Savings

Remembering to save money can be such a hassle. You have to log into your account, set up the transfer to your savings account, and then wait.

Instead, why not try setting up a recurring draft into your savings account? Or better yet, use your Chime debit card to pay for a purchase and save without even thinking about it. Your debit charge will automatically be rounded up to the nearest dollar, and the difference will automatically be deposited into your savings account.

Calculate the Cost of Purchases in a Different Way

How do you decide whether to make a purchase or not? You probably try to figure out whether you can afford it by looking at how much money you have in your bank account, right?

Instead, challenge yourself to think in a different way each time you make an optional purchase. My favorite way to do this is to calculate how many hours I had to work to buy something.

For example, if your hourly wage works out to $10/hour and something costs $100, would you be OK with trading 10 hours of your life for that purchase?

Do One Thing Every Day That Scares You

This good habit is more than just a great quote. Fear is often one of the constant drivers of our behavior, and generally not for the better.

By committing to stepping outside your comfort zone, you can gradually become less fearful. I like to think of it as desensitization therapy, as if you had arachnophobia, for example. By gradually exposing yourself to the scary thing, you start to realize that it’s not that scary after all.

Losing your fear and gaining courage helps you with every aspect of your life, including financial matters. Maybe you’ll be braver when asking for a raise, or sticking up for yourself when an institution is charging you outrageous fees.

Have Regular Money Dates With Your Significant Other

No one likes talking about money with their SO. Instead, why not try to make it a fun event that you both look forward to? Pick your beverage of choice—wine, beer, etc.—and set a date to check in on your financial progress.

Have you set any shared financial goals? If not, this is a great time to think about the future, or check in on your plans if you’ve already made goals. What can you be doing to move forward? What have you been doing well lately?

Setting regular money dates—say, once a month—can reduce your stress by keeping you both on the same financial page.

Set SMART Savings Goals—and Come up With a Plan to Reach Them

You’ve probably heard of SMART goals—specific, measurable, achievable, realistic, and timely. But have you actually done that with your own financial goals? If not, they’re not really goals. They’re just wishful thinking.

Instead, make a habit of setting SMART goals. Then, come up with a plan to meet them. If you want to save 10% of your income towards retirement each month, what can you do to get there? Can you analyze your budget to make sure you have that kind of cash to save up? Can you automate your savings so you don’t even have to think about it?

Setting SMART goals with plans to achieve them is the best way to hit your financial goals.

The Bottom Line

How many times have you petered out just a few months into the year after making a New Year’s resolution?

Instead, try committing to these healthy financial habits. Your wallet, your health, and your family will thank you for it.

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Here’s How to Find the One Thing That Will Improve Your Health and Wealth

Here’s How to Find the One Thing That Will Improve Your Health and Wealth

Here's How to Find the One Thing That Will Improve Your Health and Wealth

Forming new habits are no fun. But, what if there was a way to knock multiple good habits out with one small change to your lifestyle?

That’s the idea behind a keystone habit. Read on to learn exactly what a keystone habit is and how this singular habit can help you achieve optimal health and wealth in the new year.

What is a Keystone Habit?

A keystone habit is one single habit that has multiple positive cascading effects. Rather than shooting for multiple different habits, you can instead choose one keystone habit that will have a dozen positive effects. Here are a 4 examples to get you started:

1. Follow a To-Do List Every Day

We all have things we want to get done every day. But who the heck can remember them all when you can barely keep track of where your car keys are?

When I started following a to-do list, I noticed a ripple effect happening in my life. I became healthier because I remembered to take my dietary supplements every day. I had more money because I was prompted to check on my finances daily, and I earned more money because I remembered to follow up with clients. One small to-do list did all that, and more!

2. Exercise

Exercising has a ton of positive benefits. You can decrease your medical bills by staying healthier, and spend less on groceries since you’ll probably be more conscious of how much you eat (who wants to work off all those extra calories, anyway?) Exercise can  also make you happier because it releases feel-good, pain-relieving chemicals in your brain called endorphins. Plus, despite spending more energy on exercise, you’ll ultimately feel more well-rested because your sleep will improve.

3. Replace Soda With Water

Today Americans are drinking 25% less soda pop than 20 years ago. Still, most people are probably drinking more than they should.

Replacing soda with water not only saves you money in medical and dental bills, but you’ll also save money by not buying soda in the first place! For me, drinking water is easier anyway. I just fill my water bottle right from the tap whenever I get thirsty. No more lugging heavy two-liter soda bottles up the stairs to my second-floor apartment.

4. Cook at Home

This keystone habit might sound like a bit of a drag at first, especially if you’re the type of person who lives by the motto, “I don’t live to cook. I cook to live.” But stick with me.

Cooking at home saves a ton of money over buying take out food each night. It also saves time. Have you ever calculated how many minutes it actually takes you to go out, get food, and bring it home for everyone else to eat? Plus, you’ll eat healthier and save on medical bills over time (are you seeing a trend here?). It can even be fun to cook with family. Even I—a former hardcore “I hate cooking” devotee—can admit that cooking is sometimes enjoyable.

How to Find Your Keystone Habit

I’ve outlined some great keystone habits above, but the truth is that you need to find the best habit for you and your individual situation. To get started, make a list of all the good habits you’d like to start. Maybe it’s meditating, fasting, reading, quitting smoking, getting more sleep, or any number of other things.

Next, go through each good habit on your list and count out the potential secondary benefits of each habit. For example, getting more sleep can:

  • Make you less crabby
  • Improve relationships
  • Make you more productive during the day
  • Reduce medical bills from stress
  • Increase your happiness

Finally, choose the keystone habit that meets the following criteria: a) you think you can keep it up long-term (habit stacking can help you with this), and b) has the most beneficial secondary habits.

By following these two criteria in choosing your own keystone habit, you can make sure that it’s something you’ll stick to. After all, 2018 will come with plenty of challenges. It’s time to plan your game now so you can come out ahead in the new year!

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