In a famous scene from the film classic "Butch Cassidy and the Sundance Kid," a posse traps Paul Newman and Robert Redford on a canyon ledge high above a raging rapids. Though it's a clear choice of either being shot or leaping into the water, Sundance (Redford) refuses to budge.
Butch: "All right. I'll jump first."
Sundance: "Nope."
Butch: "Then you jump first."
Sundance: "No, I said!"
Butch: "What's the matter with you?"
Sundance: "I can't swim!"
Butch (laughing): "Why, you crazy . . . the fall'll probably kill ya!"
An investor fretting over the perils of a worrisome stock market and rock-bottom savings yields could be "encouraged" in much the same way in 2003: Why, the fees'll probably kill ya!
When investment returns are booming, nobody thinks about the toll various fees can take. When returns turn meager or negative, however, they make a bad situation even worse. It pays to monitor your investing, saving and credit card habits as you select accounts carefully.
"Investors forgot about brokerage account fees when the market was going up," said Dan Burke, vice president of research for the Gomez brokerage-tracking firm in Waltham, Mass. "But now when they're not trading and they're losing money on their existing stock holdings, they're still getting hit by account fees."
Fees to simply maintain a brokerage account can range from $15 to $45 a quarter, Burke said. If you're considered a good client because you have a certain level of assets and make a certain number of trades annually, you may not be charged an account fee at all.
If you don't reach those levels, you'll be required to pay account fees that may vary depending on how high you stand in the client hierarchy. Particularly in the case of online or discount brokers, there may also be different commission schedules for trades based on asset levels and trading frequency. At Charles Schwab and Fidelity Investments, Burke noted, active traders pay just over half what the average investor pays.
"Too many folks who aren't active traders have accounts in too many places," added Burke. "Online investors are better off consolidating with one firm to hit a certain asset threshold."
There are other new wrinkles, such as Fidelity's policy of not charging an account fee to clients who opt to receive electronic statements instead of traditional paper ones.
Meanwhile, with the average U.S. stock mutual fund down 15 percent over the past 12 months, fund fees that have been rising in recent years add insult to injury.
The average annual expense ratio for a mutual fund is 1.43 percent of assets, according to the Morningstar Inc. research firm in Chicago. That covers management and back-office costs. It can be much less for stock index funds or bond funds requiring little management, much more for expensive funds specializing in sectors such as gold stocks.
"Stock funds have seen their assets decline, and as assets decline, expenses start to creep up because you're sharing costs among a smaller pool of dollars," explained Emily Hall, senior analyst with Morningstar. "Always pay attention to how expensive your fund is at the outset, keeping in mind that some fund families such as Vanguard, T. Rowe Price and Janus have made long-term efforts to offer low-cost funds."
With the average yield on bank interest-bearing checking accounts at around 1 percent, it makes sense to avoid the fees that banks can impose.
The fee for going over the limit on your bank card has risen to $35 from $25 in the past five years. The fee for using an automated teller machine now averages $1.47 per transaction, and if you use another bank's ATM, it will charge you on top of that, according to Bankrate.com. Fees for bounced checks and late payments are also rising.
The average minimum balance required to avoid fees on an interest-bearing account has risen to $1,291 from $583 in three years.
"Read all the fine print on your bank and credit card statements carefully, for banks are inventing new ways to charge you every day," warned Daniel Ray, editor of Bankrate.com in North Palm Beach, Fla. "Customers who want convenience above all else are the ones hit hardest with fees."
Credit cards are always a battleground. A year and a half ago, when interest rates began to tumble, many banks enacted artificial floors under which they wouldn't let their card rates fall — even though the underlying index was going lower.
"In the past few months, many banks have done away with these rate floors, because in a prolonged environment of low interest rates, they couldn't defend such a policy," said Linda Sherry, a representative of the non-profit Consumer Action education and advocacy organization in San Francisco.
One-third of banks surveyed by the group said they'd raise the interest charge on an existing customer's card based on his record with other card companies — even if his record with that bank is unblemished, Sherry said. That makes it important to avoid paying late, as well as to avoid accessing all available credit. Never put more than $2,500 on a card with a $5,000 limit or it will negatively affect your credit picture, she said.
Andrew Leckey answers questions only through the column. Address questions to Andrew Leckey, "Successful Investing," P.M.B. 184, 369-B Third St., San Rafael, CA 94901-3581, or by e-mail at andrewinv@aol.com.