Friday, June 27, 2008

The "No Hidden Fees" Ripoff

Bank (and sometimes credit card) commercials often try to lure new customers by stating that with their accounts, there are "no hidden fees."

When are fees actually hidden? I understand that banks have disclosure requirements and could face lawsuits and, potentially, criminal prosecution if they do not disclose all their fees. In other words, almost any American bank can truthfully say they charge "no hidden fees," and if they can't do so truthfully, then getting new customers is the least of their worries.

The issue should be whether the bank has an easily understandable fee structure. In other words, it's a question of whether a layperson can look at the disclosures and be able to know with a high degree of certainty when a specific fee will be charged and what the amount of the fee would be. For this reason, it is often better, in my view, to have an account that charges a monthly fee but has a simple fee structure than to have a "free checking" account in which one cannot figure the fees. (Yes, I realize the federal government has certain requirements about what banks can call "free checking." Still, there are ways to charge fees on such accounts without violating the regulations.)

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