12/10/2009 12:37 pm ET | Updated Nov 17, 2011

Aggravation Fees

One thing that banks and other financial institutions do really well is penalize you for being their customer. Never is that truer than during the holiday shopping season when use of plastic is at its highest. 2009-12-10-DollarNoteWithbandaid.JPG Here are four types of fees that generate billions of dollars for banks and other not-so-consumer-friendly financial service providers. As a customer, you pay these fees not for actually using the service, but for being entitled to use it or for doing something that you did not think was part of the service in the first place.
  • Activation Fee: is a charge to open an account or activate a card. What's ironic is that you can fall for a "free" account only to discover that it is free only if you never start using it.
  • Card Purchasing Fee: this is a variation on the activation fee above, supposedly for "buying" the payment card that you will be using for the service. Except that the fine print at the back of the card and in the terms and conditions statement says that the card belongs to the bank, remains the property of the bank, no exception... so you are purchasing something that your bank legally owns.
  • Convenience Fee: bear with me, as this one is a piece of art. Banks levy convenience fees when you use certain payment cards in exactly the way you are supposed to: for purchasing stuff. Whenever you swipe those cards, the issuer charges an interchange fee to the merchant and also double dips by charging your "convenience" fee, typically $0.50 or $1.00 per purchase. To be fair, this one is not the exclusive invention of the banking industry: book an event ticket online, and Ticketmaster will charge you a booking or convenience fee on top of the margin they make on the ticket.
  • Courtesy Fee: I have to admit that I did not know about that one until I watched Frontline's TV program "The Card Game" the other night. A "courtesy" fee is in fact an overdraft fee drawn on debit cards or checking accounts, as in "we provided you with the courtesy of authorizing the $7 overdraft payment for your pizza last night, now you owe us $35". Candidly, the banking consultant who came up with this, admitted on camera that it could not be called an interest on a short-term loan, which it really is, because the Truth In Lending Act would have required that the bank disclose the equivalent annual rate of more than 20,000% to the customer. It's creative, candid and intellectually dishonest, all at the same time.
I'd like to borrow from a blog about baggage fees (charged by airlines to punish travelers bold enough to travel with a suitcase), the term "aggravation fees", as in "your being a customer is aggravating to us". It's pretty spot on. This season, consumers should rally around a good cause: get bankers on a low-fee diet. Help the banking industry go lean by reading the fine print and choosing services that are not aggravating their own customers. It's a new definition of fair trade that would make for a happier holiday season for all.