With banking, make the right choice the first time

Being on the wrong side of a bank's explanation of a confounding fee.

A recent issue of the New Yorker magazine included a cartoon of a man standing at a bank's customer service window holding a copy of what is presumably his latest statement. The bank cashier is saying: "Those are fees incurred for seeking an explanation of your fees." To the hapless customer in that cartoon, I say: "I've been there, pal." Well, not exactly, but I was recently on the wrong side of a bank's explanation of a confounding fee.

It happened within two weeks of my opening an account at HSBC here. I had specifically told the representative who processed my paperwork that I didn't want a credit card that included an annual fee. But days later I received a Visa Gold card by courier. Buried within the paperwork was a notation that the card carried a Dh400 annual fee. My account manager didn't answer his mobile, so I dropped him an e-mail, explaining that I wanted the card cancelled. He replied that there was no problem - the first year's fee was waived. He ignored my request to cancel the card.

When I recently told this story to someone who monitors the banking industry, he sighed and said: "You'll never get rid of that card." Excessive and inexplicable fees are a problem here in the UAE and, by many accounts, are getting worse. Squeezed by the financial crisis, analysts report that regional banks are making up for lost revenues by taxing their existing customers. A quick look through my bank's list of fees shows a fixed monthly service charge of Dh100, a Dh250 charge for any bounced cheque (plus a Dh25 courier charge, presumably so the bad check can be delivered in person to my door for further humiliation), a Dh150 penalty if I close my account within three months and a Dh350 charge if I should ever request a liability letter as documentation for a loan with another bank.

If I want to use my ATM card internationally, that's a Dh10 charge - if I am at an HSBC location. If I am using another bank's ATM, the bank collects an extra Dh20. When HSBC decides to change the fee schedule, it promises to notify me "by mail or by display at the bank's branches". I'm not quite clear how that will work, since I elected to get all of my statements online (in part to avoid the possibility of the Dh50 "hold mail" charge - seriously).

Now, I am not saying that HSBC is any better or worse than other local banks. In fact, in reading the terms and conditions of several other local banks, they reserve the right to change their fee structures without any warning at all. It's not only fees that are being tweaked as banks pursue additional revenue. A group of Mashreq customers are protesting the bank's move to no longer adjust variable-rate mortgages according to the Emirates interbank offered rate (Eibor). Instead, the bank is using a rate it sets internally, and some customers found that the new policy lifted their monthly payments by as much as 30 per cent.

If history is any guide, those consumers are in for a tough fight. In the US this week, a new law goes into effect that prevents companies from charging consumers for exceeding their credit limit unless they have specifically requested the ability to do so. It also requires banks to give customers 45 days' notice before raising cash advance and late fees. Those regulations were passed in response to the dismal economic climate, as well as the perception that bank behaviour helped contribute to the underlying problems. Even then, bank lobbyists were able to fend off attempts to put in place stricter regulations.

In the UAE, banks are under few restrictions. That's not the same thing as saying consumers have few choices. There are more than 50 banks operating in the UAE. And even though banks universally love their fees, the amounts vary widely. Just as importantly, different banks draw the lines in different places. For example, some banks waive certain fees for customers that maintain a minimum monthly average in the account, while others qualify account holders for lesser fees if they earn a salary above a certain level each month.

The fees for remittances also vary widely from bank to bank. For a customer with a solid understanding of his finances and what services he needs from his bank, it is possible to save Dh50 or Dh100 each month. It adds up - just ask the bank. File that advice under: "Do as I say, not as I do." I chose HSBC because my employer has an arrangement with the bank in which a representative was able to come to my office to process my paperwork, saving me an afternoon's effort.

I also recognised the brand and liked that it has numerous branches in the US. My personal goal is to tally the fees after a year and see if I could do better by banking elsewhere. According to multiple academic studies, that approach is almost certainly a mistake. For most customers, a kind of inertia sets in after establishing a relationship with a bank. The research shows that while many consumers are unhappy with their banks and would like to move their accounts elsewhere, a very small percentage actually do so.

The safest move is to make the right choice the first time. @Email:[e-mail]