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Your Bottom Line

Hidden Fees and How You Can Beat the System; Bartering is Back: When to Do It and What to Look Out For; Most Reliable Cars You Can Count On

Aired October 31, 2009 - 09:30   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

GERRI WILLIS, CNN HOST: Hello. I'm Gerri Willis and this is YOUR BOTTOM LINE, the show that saves you money.

Nickelled and dimed. We'll tell you about the hidden fees and how you can beat the system. Let's make a deal, bartering is back in a big way, when to do it and what to look out for. And the most reliable cars, a rock-solid list of cars that you can count on. The show that saves you money starts right now.

Get this. 100 percent of credit cards offered online, that's all credit cards offered online, continue to include practices that will be outlawed once tougher new rules go into effect next year. That's according to the Pew Health Group's Safe Credit Cards Project. There's talk of moving up the date these new regulations would go into effect. For more on that, we turn to John Ulzheimer, the president of Consumer Education for Credit.com.

Great to see you.

JOHN ULZHEIMER, CREDIT.COM: Likewise, Gerri. Thank you for having me.

WILLIS: Well, John, you know, Congress is jawboning endlessly about how they want to move up the date for the credit cards' act to go into effect. Are we getting anywhere on that?

ULZHEIMER: Well, it depends on how who you listen to, Gerri. If you listening to congress, yes, there is some traction, there is momentum for moving the implementation date of the card act up from February of 2010 to December 1 of 2009. However, listening to the ABA, the American Bankers' Association they're basically screaming Chicken Little, the sky is falling if you do this to us, there's no way in the world we're going to be able to comply by December 1.

I think you will see the date stay in February of next year because I don't believe that there's any way that the credit card industry can implement all these changes and fully comply with the card act in essentially less than six weeks.

WILLIS: Wow. So, there are a lot of goodies in this act for consumers, a lot of things to help you pay that credit card. Let's talk about those.

ULZHEIMER: Sure, absolutely. The -- some of the rules that are changing are, I mean, this is groundbreaking legislation, it really, truly is. Consumers who are under 21 who could have gotten themselves into significant credit card debt, they are now going to be unable to open a credit card unless they have a cosigner or they can prove that they have the capacity to make the payments on the bills.

And another one that I really, really love, Gerri, is they -- you now have to tell your credit card issuer, yes, I will allow you to approve a transaction that puts me into an over the credit limit position and therefore you can hit me a $35 to $39 fee. Today, it's just willy-nilly, it's the wild, wild West, if you go over your limit, they can nail you with the fee.

WILLIS: Right, and lots of other goodies when it comes to raising rates, too. We're going to talk a little more about that. But, John, as you know, it is hard to do without a credit card or banking account. But the costs of these products, what you pay in fees maybe more than you bargained for. Some of the most frustrating fees out there are the ones charged by your bank.

(BEGIN VIDEOTAPE)

WILLIS (voice-over): Harold Abrams is furious at his bank.

HAROLD ABRAMS, SMALL BUSINESS OWNER: I was furious that they're charging me $35 for an expense that's $1.65. I mean, it's really -- it's crazy.

WILLIS: Bank of America charges Abrams a total of $105 in overdraft protection fees to cover three charges to his checking account totaling less than 15 bucks. Abrams would rather his transactions be declined than pay the tab. He didn't know it existed.

(on camera): What is the $8.40 for?

ABRAMS: Stamps, postage.

WILLIS: And again, a $35 fee, add it all up it's $105?

ABRAMS: Yeah.

WILLIS (voice-over): According to an annual survey of bank fees conducted by BankRate.com, most consumer banking fees are on the rise.

GREG MCBRIDE, BANKRATE.COM: Fees have gone up year in, year out over the past decade. Now, some of those fees go up at a faster pace than others. ATM surcharges, in particular, increase at a rate that's far faster than the pace of inflation.

WILLIS (on camera): Use an ATM in your own bank's network, no problem, no fees, but step outside that network, you're going to pay fees, big time, an average of $2.22. That's an increase of 12.6 percent over last year. And guess what, it gets worse. Your bank charges you fees, too. For a total fee of $3.54. For accessing your own money.

(voice-over): If you have an interest bearing account and fail the keep your high minimum balance, the average monthly fee jumped five percent to $12.25. And overdraft fees were up last year, too. Fees for bouncing a check rose two percent.

Bank of America told CNN it's changed its overdraft policies just this month. No longer will it charge overdraft fees when a customer's account is overdrawn for a total amount of less than $10 and the bank won't impose more than four overdraft fees in a single day.

Elizabeth Warren, a Harvard professor who chairs Congress's TARP Oversight Committee says fees are the real way banks make their money.

ELIZABETH WARREN, TARP OVERSIGHT COMMITTEE: The truth is, there will be a different fee the next day and another one the day after that, because there are all hidden, you can't find them. The most people discover them is when they have to pay them.

WILLIS: Abrams complained to the bank twice before going to the top and writing a letter to then CEO Ken Lewis and that made the difference. His fees were removed, but the frustration remains.

ABRAMS: I really think it's unfair, especially coming from, in light of what's going on with banks now, and they're being bailed out by the government. I think they have some kind of responsibility to consumers.

(END VIDEOTAPE)

WILLIS: Back with us John Ulzheimer from Credit.com.

John, you know, we've seen trouble in the market recently. People have noticed that their credit limits are dropping, their credit charges, particularly interest rising, in fact, the pew study we talked about just a minute ago says that rates have gone up 20 percent in the first two quarters of this year, a big, big change. Are these credit card operators just trying to get in front of that law change?

ULZHEIMER: Gerri, I think you nailed it. They're absolutely trying to remold what their cardholder base looks like today because they recognize that either in February of next year or possibly December of this year, they are not going to be able to do so with the same amount of ease as they do today, so absolutely. That's why you are seeing all of these types of activities really kind of crushed within this 12 to 18-month period because they recognize next year much more difficult to do so.

WILLIS: John, is the business model changed now? I mean, is it true that banks are getting so much of their income from consumer fees that they just can't give them up?

ULZHEIMER: Yeah. Look. It's become addictive, Gerri. It really has. Fees are like $20 billion and with a "B" $20 billion revenue channel for these very large banks, so they simply are, they're going to fight tooth and nail to not give up these fees.

And look. They're very, very clever. These guys aren't dumb. If they're doing away with a fee or limiting one fee, it's like whack- a-mole, they'll just pop up and start charging the new fee somewhere else. But like for the gentlemen on the piece just a moment ago, that's a punitive fee.

He did something, going into an overdraft position, that they want to punish him for and the punishment in this case is 35 bucks for every single time he did it. There are also convenience fees like an ATM fee or a foreign transaction fee where they're just charging you for the convenience of you using their particular card.

WILLIS: Well, let's talk some more about some of these sneaky tricks they're doing right now to really build their income. What are you seeing in the marketplace that's costing consumers more?

ULZHEIMER: Well, what we're seeing is, you know, the brass ring of fees, if you will, is the increase in interest rate, and you don't recognize that as a fee sometimes. But look, if you pay $5 for the money versus $1.50 for your money, that is, in some peoples' eyes, in fact a fee.

I remember using an ATM several years ago, the fee was 75 cents. Today that's a comical amount as a fee. Now in the $3 and $4 and $5 range, so you're become almost accepting to the types of fees when the reality is that you can be more strategic about the credit cards that you use and the service that you use at a bank or most importantly who you do your banking with.

There are certainly banks and credit unions not doing these types of things because they didn't take that massive bite out of the subprime apple and they're not hemorrhaging money and they don't have to juice the consumer in order to make up for it.

WILLIS: All right, I gotta ask you though, John, how do you fight back? What can you do if you're a situation where your fees have just gone through the roof and you can't afford it?

ULZHEIMER: Look, banks recognize that it's inconvenient and it's not fun to switch financial institutions, but if you have gotten to a point where you are just flat-out sick and tired of the fees and the treatment that you are getting from your bank or credit card issuer, take your business elsewhere. It's the most difficult thing to do, Gerri, to acquire a good customer and you really do have the leverage and the upper hand. Take the business to a credit union or to a local bank who isn't doing these types of things.

WILLIS: John, love that. Use your leverage. Now, don't move, don't go anywhere. Up next, more hidden fees and what you can do about them. Also ahead, a complete guide to bartering. We'll teach you how to score the very best deals.

(COMMERCIAL BREAK)

WILLIS: Fees, fees and more fees. By some estimates the average American spends between $2,000 and $4,000 a year in fees they didn't even though they were paying and the cost of these hidden fees can really take a toll on your wallet in the long run.

(BEGIN VIDEOTAPE) WILLIS (voice-over): From cell phones to cable service to credit cards and banks to airline travel and hotel stays. Experts say the average American is spending close to $1,000 a year extra on hidden fees and surcharges, a nickel here, a dime there.

BOB SULLIVAN, "AUTHOR, THE RED TAPE CHRONICLES": That's real money and married couples were talking about $2,000. That's a nice chunk of change to stock a healthy retirement, pay for a nice vacation, get a head start on school costs.

WILLIS: Bob Sullivan, author of "The Red Tape Chronicles."

SULLIVAN: But, almost every transaction now, if you're buying a car, buying a house, getting a cell phone, the company knows far much more than you do, inducing, they know what the real cost and when there's all this confusion over what things cost, well, consumers lose.

WILLIS: And they're losing in a big way. The average fee ranges from less than a dollar to $10. While that may not seem like a lot of money, it adds up. Cell phone fees average $9.40 per pre month, more than $116 a year. Cable and satellite TV fees on average run $9.52 a month totaling $114 a year. Every time you fly, $33.44 with a national average of 3.5 tickets a year, that totals $102 a year.

Credit card fees are $7.72 a month bringing the annual cost to $92. And the average fee incurred for a hotel stay is close to $25, roughly $95 a year per person. Bjorn Hanson is professor at NYU's Tisch Center for Hospitality. Hanson says hotels have become more creative in what he calls the surprise fee.

PROF. BJORN HANSON, NYU'S PRESTON ROBERT TISCH CTR.: The hotels fees in 2008 collected about $1.75 billion on fees and surcharges. Some fees that surprise guests the most would be an early departure fee, a cancelation fee, mini bar restocking charges, luggage or baggage holding fees.

WILLIS: Some hotels go as far as charging resort amenity fees for towels and some urban hotels even charge a daily fee for receiving faxes.

(END VIDEOTAPE)

WILLIS: Surprise fees, hidden fees, it all adds up. Back with us again, John Ulzheimer from Credit.com.

John, you've got to ask up front what the final cost, the total cost on whatever you're buying is going to be? Right?

ULZHEIMER: Absolutely. Look Gerri, I'm just waiting for the day where to walk up the aisle on the aisle at 30,000 and put a dime into the bathroom just to get in. The question is, what is the breaking point in that's a question is we all have to ask ourselves. Am I going to pay a buck for this, two bucks for that, nine bucks for this? And the answer is yes, fine, they've got you. But if the answer is no, then you really have to do research. It's called fine print for a reason because they don't want you to see the fee that you could avoid in many situations.

WILLIS: But John, let me ask you this, because I know a lot of people think, you know what, I'm not going to pay, that but if you don't pay that, doesn't that hurt your credit score?

ULZHEIMER: Ah, very, very good point. Choose to lose the battle, but continue to win the credit war. If you're implemented with a fee that you have contractual liability for, like for example, breaking a cell phone contract early and they hit you for the remainder of what your cell phone costs...

WILLIS: Drives me.

ULZHEIMER: Pay it, pay it, pay it, pay it, because you don't want to end up with a collection on your credit report. Good point.

WILLIS: All right, and also, I mean, you can't put your head in the sand about this. With overdraft fees, in particular, you can't ignore this, you've got to be proactive. You got to make sure you're getting the alerts to the cell phone. What else can you do so you know ahead of time what you're being charged?

ULZHEIMER: It's a matter of focusing on your statements every month and really being more engaged with the accounts in an online environment so that you can see, look, I'm approaching the credit limit. Getting the point I don't have more funds in the checking account and I'm going to go into an overdraft position. It really is a responsibility, not only of the financial institution or the service provider, but also us as the customer to make sure that we stay away from the fee.

WILLIS: I love that. John, thank you so much. Great to see you again.

ULZHEIMER: Thank you, Gerri.

WILLIS: In tough times, is bartering the way to go? We'll tell you when to do it and what to look out for.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

JOY BEHAR, HLN ANCHOR: So you might say so what? Who cares? Why bother? Well, if there's one woman who knows how to barter it's CNN personal finance editor, Gerri Willis. Tell them, Gerri.

(END VIDEO CLIP)

WILLIS: I love that. Thanks to our friend Joy Behar for that. You can catch the JOY BEHAR SHOW every night at 9:00 Eastern and Pacific on HLN. Enjoy it, it's a lot of fun.

OK, let's get down to business. Money is tight for all of us these days and some say bartering is the new national past time. Janet Bodnar is the editor of "Kiplinger's Personal Finance" and joins us now from Washington.

OK Janet, tell us why you think bartering is so popular now.

JANET BODNAR, KIPLINGER'S PERSONAL FINANCER: Well, a couple of things, Gerri. First of all, it is a good dedeal and we're seeing on sites like Craigslist and that sort of thing the interest is just increasing by leaps and bounds. And aside from the fact that you can get good deals, apparently it's fun. People actually like this, they like to do deals. You know? So, why not?

WILLIS: I know people do this all the time, you know, they're trade like, you know, I'm redoing my bathroom, I have somebody who knows how to do some of that work, come over and then I exchange something else for them. You know, people do it informally, but you asy increasingly people are doing it online. What are the good Web sites?

BODNAR: Well, there are a couple here. There are a number of them. One of them is called Barter Quest, one of them is called Barter Bee. We actually, on our Web site, on our home page, at Kiplinger.com, we list them all and we tell what services each of them offer. So, people can go on there and look. But the sites are taking advantage of the interest, there's a very growing interest in this so that people can post their goods and services that they have up for barter.

WILLIS: Is it buyer beware, though? I would think it might be dangerous online on some of these sites because you really don't know the person you're bartering with.

BODNAR: Exactly, and that's the thing. again, we have at Kiplinger.com, we'll tell you which sites do the limited amount of vetting of people. You might sort of want their name and address. And obviously if you're really looking for a serious service, like you're looking for a babysitting service or something like, I'm not sure that this would be the best way to go. You'd really want to start first with your neighborhood people so that you could barter with them, people that you know and you know their reputations and you can find out what their background is.

WILLIS: All right, how do I handle this with the IRS? Is this income? I mean, do you have to tell the federal government?

BODNAR: Well, a couple thing, Gerri. It could potentially be. If you're just doing this occasionally, then probably you're OK. If it's something you're doing -- if you get into it and you're doing it a lot, I think what you do, you need to go to the IRS Web site and they can give you all the rules on bartering.

Now, if you're a business and you're doing this routinely and you are trading services with another business, it probably does count as business income. So, it kinds of depends on what level you are. If you're just an occasional, an accidental barterer versus someone who does it all the time.

WILLIS: Well, you know, Janet, can I save lot of money doing this? I'm wondering at the end of the day what kind of savings are in this for me?

BODNAR: Well, look, I mean, it's interesting, Gerri. Some of the examples we used in our story, we've used someone who traded, of all things, a clothes dryer for a table saw. You know, who knew? Something like that. Or we were talking about leases and how people -- leases and maybe cell phone contracts that people get involved in and they're tired of their car lease or they want to get out of their cell phone contract, sometimes you can barter this, because there are other people who want short-term contracts or who would like your lease. So, there are ways to get out of things early. So, that's a very interesting thing.

When I was getting my makeup done before , the makeup artist here was saying, you know, I would like to barter my services for a wedding party, maybe a dentist's daughter is getting married and he would clean or whiten my teeth for me, you know, and I would like to barter that kind of service, or a dermatologist doing Botox injections. You know, so there's a lot of creative stuff going on out there.

WILLIS: And I love that idea, it's a creative solution to a tough problem if you're short on money. Janet Bodnar, thanks for bringing it to us.

BODNAR: Oh, my pleasure.

WILLIS: OK, everybody loves this list: The most reliable cars of the year. Is your car on it? Who made the cut? Find out, next.

(COMMERCIAL BREAK)

WILLIS: Well, it's been a big year for the auto industry. Bankruptcy, bailouts, Cash for Clunkers? The only way to describe it is, well a mess, but the most important thing for most of us, is your car reliable. Jon Linkov is "Consumer Reports" auto editor and he joins now from their headquarters in Yonkers, New York.

John, great to see you.

JON LINKOV, CONSUMER REPORTS: Same here, Gerri. Thank you.

WILLIS: No, you had some interesting findings about Ford and its reliability. Tell us about that.

LINKOV: Well, what we found in our survey of our seven million subscribers is that Ford products really have done extremely well in reliability. In fact, models such as the four-cylinder Fusion and the Mercury Milan are up and on par with the Toyota Camry and Honda Accord in terms of reliability. The entire line for Ford is actually pretty reliable.

About 90 percent of the vehicles are average or better reliability, so you have a really good chance of buying a reliable Ford. They test well on our testing process and they're good vehicles. So, when you're looking for a family sedan or small SUV or something, definitely look for a Ford as well as going to some of the Asian brands. WILLIS: And some of the findings here, Ford is actually the best of the American automakers, which is sort of like saying you're the prettiest girl in the class with no other girls. I mean there aren't a lot of them, right?

LINKOV: Well, General Motors has some products that are pretty good. They're hit and miss. What the problem for GM has been they've had such a wide portfolio of products that they've had to spend their limited resources focusing on one, focusing on another, focusing on something else and not being able to focus their attention across their line. Ford, on the other hand, they've had some products that are a bit older, but they launched them well, they didn't have to continually improve them in wholesale.

So, Ford is doing well, General Motors OK, Chrysler, yeah, Chrysler is that, you know, kind of the person on the side of the high school dance.

WILLIS: And that's the nicest thing you can say. We just quickly want to show a couple of your lists of most reliable when it comes to small cars. So, let's show our audience that and you can help us understand what you've got here. You've a couple recommendations in this list. The Honda fit and the Scion. These are the small cars that really make sense. And what's wonderful about this, you're saying you don't have to buy a luxury car to get reliability.

LINKOV: That's exactly right. I mean, if you're looking at the Honda Fit, you're looking at the small Scion, the XA and the XD, these are vehicles that are very affordable, they do everything that you would need in the sense of roomy, they're reliable, they're fuel efficient, they test pretty well in our program, and they're all going to be under $20,000, even loaded out.

If you look at our list of some of the least reliable, it's filled with a lot of expensive luxury sedans, expensive luxury SUVs. They're more complicated. They may be great to drive and test well, but the reliability is shoddy.

WILLIS: I want to show you the family cars here, the most reliable family cars. This is an important list for people out there. Toyota Prius, a lot of hybrids on this list. Hybrids are doing well in terms of reliability. That's not necessarily something I would have guessed.

LINKOV: You know, people think about the hybrids, that they're very complex. The hybrid prius has been out for three generations now. You've seen the Ford Fusion hybrid is brand new but it uses a similar technology, a similar drive train, not the same, but similar. Same with the Ford Escape hybrid. These are all vehicles that have done very well.

The Honda Civics another one. They've had a lot of focus on their drive trains, I believe, something that the manufacturers don't want to have hybrid problems, so they've paid a lot of attention to making sure these are reliable. It shows in our survey. Readers have said they're very, very reliable. We have data on 1.4 million vehicles, so it's backed by a lot of important information.

WILLIS: Jon, great stuff. Thanks so much for helping us out.

LINKOV: Thank you very much, Gerri.

WILLIS: As always, we thank you for spending part of your Saturday with us. YOUR BOTTOM LINE will be back next week, right here on CNN. You can also catch us on HLN every Saturday and Sunday at 3:30 p.m. Eastern Time. And you can hear much more about the impact of this week's news on your money on YOUR MONEY with Christine Romans and Ali Velshi, Saturdays at 1:00 p.m. Eastern and Sunday's at 3:00, right here on CNN.

Don't go anywhere, your top stories are next in the CNN NEWSROOM, have a great weekend.