Published in: Credit Cards | Nov. 15, 2019
Americans Agree This Is the Biggest Waste of Money. Here's How to Avoid It
These fees can eat into your budget, and you might not even be aware of them.
We don't always agree on what wasteful spending looks like. Some people think eating out is a waste of money, while others place a high value on a nice restaurant meal or the time they save by not cooking. You might think a trip to Japan is wasteful, but someone else might prioritize travel over the things you spend money on.
But there's one thing almost everyone can agree on, according to a study on wasteful habits published by The Ascent: Unnecessary fees and excessive interest are a waste of money. Roughly three-quarters of respondents agreed that it's wasteful to spend on those two items. To compare, only half thought the same of frequently eating out.
If you agree that these fees are a huge waste of money, here's how to cut down on them.
Watch out for hidden banking fees
There are lots of options for bank accounts and credit cards, and they aren't all the same. If you aren't careful to choose the right account for you, you might start racking up banking fees without even noticing it.
Some of the most common banking fees include monthly maintenance fees, ATM fees, foreign transaction fees, overdraft fees, and late fees. If you want to avoid unnecessary fees, the first step is to open checking and savings accounts that are completely free. While some banks will waive the monthly maintenance fee if you maintain a certain balance, it's best to go with an account that's always free, even if your balance drops to zero. There are plenty of free checking accounts and online savings accounts that can be opened free of charge and don't require a minimum balance.
Next, you'll want to stick to in-network ATMs in order to avoid being charged an ATM fee. If you travel a lot, you'll probably have trouble finding in-network ATMs all the time. Luckily, there are a few debit cards that offer unlimited free ATM withdrawals, and some even offer ATM fee refunds if you're charged a fee by a foreign ATM. Another important factor that frequent global travelers should consider is the foreign transaction fee, which usually adds 3% to any purchase you make abroad. There are a small handful of debit cards that don't charge a foreign transaction fee, but it's easier to find this feature with credit cards. Open one and use it for international travel.
Finally, you can avoid late fees and overdraft fees by staying on top of your spending and due dates. You should check your bank accounts regularly to make sure you're not in danger of overdrawing, and set up autopay so you never miss a bill due date.
Avoid high-interest debt
When it comes to excessive and unnecessary fees, high-interest debt tops the list. Credit cards are the most common culprit, often charging interest rates in the 15% to 18% range. If you carry just a $1,000 balance on a credit card with an 18% APR and make the minimum payment each month, you'll end up spending over $500 on interest fees by the time you pay it off.
Instead of pulling out your credit card when you're short on cash, consider less expensive alternatives. If you can't get away with not spending the money or making a quick buck somehow to cover the expense, borrowing money from friends and family is the next best option. After that, you could consider taking advantage of a promotional 0% APR credit card offer, but you have to have good credit, and it's crucial that you pay off the balance in full before the promotional period ends and the interest rate skyrockets.
If you have to pay interest, look at low-interest credit cards and reputable personal loans first. Your local credit union might be a good option, as credit unions often offer lower interest rates than national banks.
Lower your current interest rate
If you're already paying excessive interest fees on debt you currently have, you've got a few options to try to lower that rate. If you've got credit card debt that can be paid off within 15 to 21 months, consider doing a balance transfer to a credit card that offers 0% interest on balance transfers for a short period of time. If you don't think you can pay off the balance before the promotional period ends, look for low-interest credit cards instead that allow balance transfers are don't charge high balance transfer fees.
Depending on the type of debt you have, you might also want to consider refinancing or consolidating your debt. If you have good credit, you might be able to refinance your student loans or your mortgage at a lower rate. Folks juggling multiple credit card balances or high-interest loans could look into a debt consolidation loan. These loans are used to pay off all of your debt so that you only have to make one monthly payment on the new loan.
Just make sure the new loan comes with a lower interest rate and favorable terms. Shopping around and taking the time to do your research pays off. Whatever option you choose, the point is to spend less money on fees, not more.
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