How To Avoid Unnecessary Bank Fees.

With the current economic crisis in which we now find ourselves, look for your local bank to be increasing fees for services. In fact, I recently spoke with a banker friend of mine and he said that with the new FDIC insured deposit limit being increased to $250,000, the banks’ costs of that insurance will nearly double. The only way for them to get that money back is to increase their fees. With that in mind, here are a few tips to help you avoid some of these fees.

Many of these fees come from “courtesy” services that banks offer on overdraft policies. These services allow the bank to clear your check that might otherwise bounce when you don’t have sufficient money in your account to cover the check. Worse still, many banks simply use software to handle these situations without regard to the account holders ability to pay back the overdraft and it’s associated fees. If you have teenagers with checking accounts, you probably know just what I am talking about. I have had my kids essentially borrow less than a dollar and have to pay over $100 in fees for the privilege.

Here are some of the ways your bank might trip you up with pricey overdrafts:

Debit and ATM cards

Many people mistakenly believe that using a debit card will prevent them from overdrawing their account. In fact, debit card use triggers 46% of all overdrafts according to the Center For Responsible Lending. Most banks will allow the debits to go through even when no money is available in the account.

How do you avoid this? Ask the bank to set the debit-overdraw limit on your account to zero. Transactions that would put your account in the red will now be rejected.

Reordered Debits and Deposits

Banks often change the order in which debits and deposits occur in your account. Some banks pay daily transactions in order from highest to lowest, while others use any order they choose. Banks will try to justify these practices as a way to ensure the most important debits get paid but in fact this is simply a way to increase the overdrafts. Let me give you an example. Assume you began your day with $200 in your account. You get a coffee ($5) and then gas ($50), then purchase an mp3 player ($130) and then get lunch ($8) and finally stop for groceries on the way home ($35). If these are processed chronologically, only the last item will trigger an overdraft. But taken from largest to smallest triggers 3 overdrafts. Voila, more money for the bank.

How do you avoid this? Buffer your account with an extra $100 or so that you never dip in to.

Time Is Of The Essence

If your bank pays a courtesy overdraft, then they have essentially loaned you money. You should expect the interest rate on this type of loan to be very high. Worse still, they can add processing fees as more time goes by. Some banks add another $35 after 7 days on each overdraft! The worst part of all is that you may not know about it until your statement comes in at the end of the month. This is how my teenager spent over $100 to borrow 65 cents one time.

How do you avoid this? Set up another line of credit from a savings account to immediately pay off any courtesy overdrafts. Also, if possible, ask your bank of the fastest way they can notify you of an overdraft and make sure your agreement stipulates that form of notification.

They Keep On Lending

Only 30% of the major banks have a limit of courtesy overdrafts. This means that many small items can keep on upping the ante for you as they come in. Worse still, many banks have a tiered system that increases the fees for each additional overdraft. You can get into some pretty serious money pretty quickly over one small mistake.

How do you avoid this? If the cause of the problem is one mistake, go to the bank and ask them to waive the fees. If you can show that it all evolved from one item and that your account has not had overdraft issues in the past, you may be successful.

At Clinard Insurance Group in Winston Salem, NC, we help thousands of people living in NC with their personal insurance needs such as auto insurance and home insurance as well as their business insurance and life insurance needs. We are an independent agency and our trained professional agents will take the time to listen to your needs and then find you the protection you want and need at the lowest possible price. Give us a call, toll free, at 877-687-7557 or visit us on the web at www.ClinardInsurance.com.

The source information for this article was pulled from the Clinard Insurance Group lifestyle tips and tricks blog.

What Happened to the Grace Period On My Insurance Policy?

Over the years at Clinard Insurance Group, helping people with their insurance needs, I have heard this question many times. It doesn’t matter if they are talking about auto insurance, home insurance, general liability insurance or workers compensation insurance, people still assume that there is some magical grace period that allows them to pay their insurance payment after the due date. I’m not sure exactly where the terminology comes from but I think I have an idea where the concept arose.

In NC, if you don’t pay your insurance policy when it is due, then the insurance company cannot just cancel your policy that day. The law requires that they give you a legal notice of cancellation. The time frame for this notice varies by policy type but it is generally around 15 days. So, if your policy is due on the 5th of the month and you don’t pay the bill on time, then somewhere around the 10th of the month or so, the insurance company will send out a notice of cancellation on your policy. This notifies you that if your money is not received by a certain date (here is the legal notice time frame), then your coverage under that policy will cease.

I think this notice period is what has led some people to believe that there is a “grace period” which allows them to pay their premiums after the due date. But paying late and relying on this legal notice time frame is a dangerous practice for several reasons.

First of all, the insurance company doesn’t have to accept your money after the due date and they can let the cancellation stand. If you have had a loss during this time, you might not even be protected since in some cases (particularly on policy renewal dates) the notice of cancellation states that the effective date for when protection ends is the same as the original payment due date.

Secondly, there is a growing trend among insurance companies to charge hefty fees for payments that are late. Some companies charge as much as $35 to reinstate your policy after a cancellation notice has been issued. These changes tell me that the insurance industry has decided that as times are hard and people are letting some bills slip a bit, they want to be first in line. So if you are having some cash flow issues and think you might want to pay your insurance bill a little late, be sure that you understand all of the late penalties and fees that will apply. You might choose to prioritize the insurance bill closer to the top of the pile.

There is a sure fire solution to prevent a late payment on your insurance policy and thus prevent lapses in protection and costly late fees. Most all insurance companies can now take your payment on a monthly bank draft. This means that they will draft the money from your checking or savings account on the due date automatically. Of course this will fail if there is not enough money in the account to pay the bill, but for protection from forgetting or misplacing an insurance bill, this one could save you a lot of money. At Clinard Insurance Group in Winston Salem, NC we try and make this option available to any an all of our clients who might be interested. If you would like to know more about the specific fees your company charges for late payments, or if you would like to have your policy set up on bank draft, please call our office at 877-687-7557 or visit us on the web at www.clinardinsurance.com.

The source information for this article was drawn from www.insuranceguy.com.