There are many ways used by businesses to separate you from your hard-earned cash, but unnecessary fees are hated the most. Many of these fees provide you with no benefit and have no purpose other than padding the bottom line of the business that is charging the fee. Companies earn billions of dollars this way, sucked directly from consumers’ pockets. Here are some of the worst fees and how you can avoid them to save more of your money.
High Investment Fees
Many average people use their investments to fund their retirement years and work really hard during their working years to be able to put enough away for a comfortable retirement. Unfortunately, there are some companies that charge way more than they should for managing your investments and making trades on your behalf. Fees for 401k plans with less than $10 million in assets generally average 1.9%, but people investing with full-service brokerages or in variable annuities can easily pay 2% or even 3% when all costs are considered. There is no evidence that paying more gets you better returns, so consider hiring a fee-only planner who charges by the hour.
Insurance You Do Not Need
Many businesses now sell what consumer advocates call ‘junk insurance,’ referring to insurance products that are overpriced and full of hidden traps that make the coverage hard to use. Read all of the terms and conditions of the insurance product carefully before signing anything to ensure that you know what you are paying for. It would also be helpful to calculate the difference between the insurance payments and the value of the item to be insured to make sure that you are not paying more in insurance than the item is actually worth.
Excessive Annual Fees
Many rewards credit cards and other credit products require the account holder to pay an annual fee for the privilege of being in the program and using the card. These fees can add up to a significant amount of money and are charged directly to the credit card, increasing the balance that is subject to interest charges and financing fees. Although you may be earning rewards with the card, you may be paying more in interest and fees than you are earning in rewards. If you have a decent credit score, choose a general-purpose credit card that does not have an annual fee and get rid of the ones that charge you just because they can.
What do you think about these fees? Share your opinions with our readers.