How to Save Money » Banking

Avoiding fees is smart finance

There are all kinds of fees and penalties that you could potentially pay, and it’s your responsibility to understand and avoid them. Most fees are avoidable. Unfortunately, many people allow themselves to be robbed of their hard-earned money. Most people don’t realize that fees add up quickly and could cause significant damage to your finances in the long run.

Common fees and how to avoid them

Late fee

This is the most common of all fees. Most people pay late fees because they either forget or couldn’t afford to make the payment. If you’re the forgetful type, pay your bills as soon as you get them, or schedule automatic online bill payments. It’s also a good idea to write down due dates directly into your organizer or calendar so you’re constantly reminded.

If you’re paying late fees because you can’t afford to pay on time, you have a more serious issue. In this case, you need to better understand your finances, which you can do by starting a budget. Next work on cutting down your expenses and spend less. Properly done, this will give you the extra cushion you need to pay your bills on time

Overdraft fee

The overdraft fee is more costly than other types of fees because you’ll end up paying other fees in the process — i.e., late fee, and finance charges in the case of a late credit card payment (assuming you usually pay off in full each month).

If the root cause is the same as above, you fix it in the same manner But if you’re bouncing checks because of poor management (e.g., not transferring enough money into your checking account, or not transferring on time) then there are easy solutions. You can keep money in a high yield checking account (to avoid back and forth transfers), or enroll in an overdraft protection plan (usually for a small fee).

Finance charge

Last but not least is credit card finance charges. If you’re only paying the minimum on a $10,000 balance at 20% interest rate, it will take you more than 9 years and $11,680 in interest charge to pay off the original amount borrowed. Yes, your $100 iPod actually costs you $216.80. The finance charge is easily avoidable if you pay off your credit cards in full each month. If you can’t afford to pay off your credit card bills, don’t charge it!

Of course, there are plenty of other fees we can talk about. But you I am sure you got the idea. Fees are your enemies. Do what you can to avoid them.


  1. Mike Piper

    Excellent advice, Pinyo.

    I’d add one more: Excessive mutual fund management fees. Over a lifetime, these can potentially dwarf the others. (And many people don’t even know they’re paying them!)

  2. cwrea

    Agree, but I wouldn’t just say “fees are your enemies”… fees are *evil*! Don’t give in to evil 🙂

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