What's more important: a good interest rate or low banking fees?

Know exactly what you're getting into, so you can make an informed decision.

Getting the best return on your dollar is the goal of investing, whether it's to buy a house or set up a savings account. When you head into the market for a can of beans, it's easy to know what you'll be spending. Not all goods and services offer that clear a picture of what a transaction entails, though. If you've tried to decipher your phone bill, it's easy to see that some services can be complex, and the more complex they are, the more opportunity there can be for confusion.

Finding a good interest rate is important, but high fees can take a big bite out of the potential benefit of any favorable interest rate you may qualify for by piling on up-front charges and periodic costs. Whether you're investing or borrowing, the relationship between interest rates and fees is closely linked. You can't make an informed decision about how good a potential loan, savings account or investment is without understanding the rate being offered, and the fees that accrue based on the agreement. Your best recourse is to shop the best interest rate available in a plan that also carries the lowest fees you can find. This isn't always as easy as it sounds, though. Banks bundle fees, call them by different names and otherwise muddy the waters when you're trying to make an apples-to-apples comparison. To find the best rates that carry reasonable fees takes research and some close scrutiny.


There are some things you can do to help handle fees, though. Taxes are typically firm fees, but you can review the services you're interested in with regard to the other types of fees involved. Some banks charge fees for online services while others don't. Some charge fees for going below a minimum balance. Work to tailor your accounts to meet your specific needs, and take measures to avoid extra fees whenever possible.

The second thing you can do to help manage fees is to make a habit of analyzing the line items on your statement to understand the legitimate fees you're being charged and recognize errors if they occur. It's important to read updates and changes to existing agreements, policies, accounts or loans, too. They alert you to fee changes and other information, like changes in the bank's policy regarding the way your personal information is handled.

When it comes to the relationship between interest rates and low banking fees, the most important factor is your commitment to understanding how the whole package -- fees and all -- works to fit your lifestyle and financial goals.


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  • Alderman, Jason. "Understanding Bank Fees." Practical Money Skills for Life. (10/17/11). http://www.practicalmoneyskills.com/personalfinance/experts/practicalmoneymatters/columns/bankfees_031408.php
  • BankRate. "7 Ways Checking Accounts Cost You More." (10/17/11). http://www.bankrate.com/finance/checking/7-ways-checking-accounts-cost-you-more-1.aspx
  • Banks, Maria Elena. "How Low Can Interest Rates Go? Understanding this Historic Moment." Wing Wire. 8/19/11. (10/17/11). http://www.wingwire.com/comments/mebanks/null/19622
  • Consumer Reports Money. "Hidden Fees Exposed." 1/2010. (10/17/11). http://www.consumerreports.org/cro/money/credit-loan/hidden-fees-exposed/overview/index.htm
  • Hogan, Mike. "How to Stop the Bank Fee-for-All." (10/17/11). http://online.barrons.com/article/SB50001424052748703927304576637292334863976.html?link=SM_pln_bk_res
  • Rivero, Justine. "How Consumers Should Beat the New Banking Fees." Forbes. 10/11/11. (10/17/11). http://www.forbes.com/sites/moneywisewomen/2011/10/11/how-consumers-should-beat-the-new-banking-fees/
  • Smart Money. "5 Mortgage Fees to Watch Out For." 7/28/08. (10/17/11). http://www.smartmoney.com/spend/family-money/5-mortgage-fees-to-watch-out-for-23556/