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Don't Throw Your Money Down the Drain

"I went like a penny over," swears Ben Kohler, 19, about his emergency purchase of gas last year. But that penny tipped the Wright State freshman's checking account into the negative, triggering a $40 fee. He later opened his monthly bank statement to find that his account was $200 in the red as additional overdrafts and penalties piled up.

"Let's just say there were words involved," he says about his reaction. "My parents had to help me out. My old local bank would usually warn me if my balance was low," Kohler explains.

But when he left for school and switched to a national financial services giant, no such courtesy came with the checking account. "I learned the hard way that one overdraft or other fee can be a stone that knocks loose a boulder," he recalls. To keep your finances from being crushed by bank and credit card fees, use this guide to learn about their triggers and how to avoid them.

In 2007, Americans paid more than $38 billion in bank fees and $63 billion in credit card fees.

Overdrawn
To help out his grandparents when they were ill a couple of years ago, Karney Hatch used his debit card to pay for some groceries and prescriptions. He spent $65. At the time, he didn?t realize that was $65 more than he had in his account.

"My bank charged me $140 in overdraft fees," Hatch says. "That was $35 for each purchase I made." "It struck me as unfair," says the 36-year-old filmmaker. He decided to document his experiences in "Overdrawn," a 74-minute movie about his story. With the film, Hatch hopes to raise awareness and educate consumers about unnecessary fees.

Overdraft Fee

Trigger
Any time you make a withdrawal from an ATM, pay a bill online, write a check, or make a debit card purchase that exceeds the amount of money in your checking account.

Cost
About $30, or higher for repeat overdrafts.

How to avoid
Know your checking account balance, especially before you plan to spend. And know if your bank will let a debit card transaction go through even if you don't have enough money to cover it. The fee for this service can quickly get you into trouble. Set up account alerts so your bank will either e-mail or text message you when your account is running low. Sign up at your bank for overdraft protection by linking either your credit card or savings account to your checking account so that money can be transferred when your spending exceeds your balance. Ask if a fee is charged for this protection. Another option: Put $100 in your account and forget about it.

ATM Fee

Trigger
If the ATM you use is not affiliated with your bank, that ATM's bank may charge you for debit card withdrawals or other transactions.

Cost
$1.50 to $3 -- often higher at airports, hotels, and restaurants.

How to avoid
Some banks allow you to use any ATM machine without charging fees. If your bank doesn't, plan ahead and only withdraw money from ATMs affiliated with your bank. Better yet, switch to a bank that reimburses you those fees. (See page .22 for details.) If a friendly ATM is nowhere in sight, pop into a grocery store and use your debit card to buy a pack of gum and ask for cash back, advises Emily Davidson of credit.com. "It's safe and foolproof, and a really good way to get cash without having to pay a fee," she says.


Late Payment Fee

Trigger
Any time your credit card payment reaches the company after the due date on your statement. These fees also may kick in if you pay less than the minimum due.

Cost
$30 to $40 per late payment, and again the risk of big jumps in your interest rate.

How to avoid
If you pay your bills online, program an automatic payment and schedule it to arrive two to three days before the due date. If you pay by mailing a check, consider purchasing a bill organizer that provides a visual reminder of when your bills are due.

Credit Card Over-Limit Fee

Trigger
Going over your credit limit, even by a cent, can set off an avalanche of credit troubles.

It may cause your card?s interest rate to double or triple. A jump from 11 percent to 35 percent is not uncommon, Davidson says. "Any time you're maxing out your card, it's really horrible for your credit score," she warns. It can cause rejected loan applications and higher interest rates on car and home loans and future credit cards.

Cost
About $35 on average, plus a likely jump in your card's interest rate.

How to avoid
Be aware of your credit-card balance and know the exact consequences if you go over the limit. Sign up for account alerts so that your credit card company will alert you by e-mail or text message when your account is close to its limit. Or, you can check your balance by calling the toll-free number on the back of your plastic, or checking your online statement. If you've already crossed the line, call your credit card company immediately. As a quick fix, customer service reps have been known to bump up credit limits for reliable, aware cardholders.


Debit Card Fee

Trigger
When you punch in your personal identification number (PIN) at the grocery store, gas station, or other retail outlet, many banks tack on a PIN-based, debit-transaction fee.

Cost
Up to $1.50 per transaction.

How to avoid
Opt for a bank that doesn't charge this fee. Until you switch banks, punch the credit key instead of the debit key when you swipe your card. This pushes any fee onto the merchant.

Bad Deposit Fee

Trigger
A friend uses a check to pay you back, but her account doesn't have enough cash in it to cover the check. Your bank will charge you for returning the check unpaid to her bank.

Cost
About $10 at most banks.

How to avoid
If you have doubts about the check, try to cash it at the bank that issued it.

Balance Transfer Fee

Trigger
You transfer your debt from one credit card to another.

Cost
Usually about 4 percent of the balance you're transferring, which means if you shift $3,000 to a new card, you may find $120 tacked on.

How to avoid
Before you decide to move a balance to a new credit card, understand the fees that will be charged.

Tip
Shifting your balance to a card with a lower interest rate can save you money. But beware of those 0 percent offers. Most only last six to nine months then jump to a higher rate.

And if you're late with a payment or go over your credit limit, you can instantly kiss the zero percent good-bye.

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