Key takeaways
- Banks come with an array of fees but it is possible to avoid them. Learn your bank’s fee structure to be prepared.
- Traditional banks charge a lot of fees. Many online-only banks are less costly and do not charge minimum balance fees, monthly maintenance fees, or overdraft fees.
- Many fees are avoidable. You can avoid ATM fees by only using ones in your bank’s network and paper statement fees by choosing electronic statements.
Banks offer a wide range of financial services, but they also come with an array of fees that can chip away at your hard-earned money. If you’re not careful, you may start wondering if it’s worth the convenience. These fees can include charges for maintenance, overdrafts, ATM usage, and more, each adding an extra cost to your banking experience.
The good news is, that most bank fees can be avoided entirely with a little strategic planning. By being aware of these potential charges and taking proactive steps, you can keep more of your money in your pocket.
Here’s a rundown of 10 common bank fees and tips on how to steer clear of them.
1. Minimum balance fee
A lot of banks require a minimum balance in your account to avoid incurring fees. If your balance drops below this specified amount, they will charge you a fee. These fees can vary widely, with the average being around $5, but in some cases, they can go as high as $25 or more per month. Such charges can add up quickly, becoming a significant drain on your finances.
To avoid these fees, do your research and choose a bank that either has a low minimum balance requirement or none at all. Many traditional banks have stringent minimum balance policies, but lots of online banks have eliminated the minimum balance fee entirely.
Online banks provide a cost-effective solution for those who may not consistently maintain high account balances. Online banks have fewer overhead costs, allowing them to pass on the savings to their customers by offering fee-free or low-fee accounts.
Some credit unions and community banks also provide accounts with lower or no minimum balance requirements. These financial institutions offer a more personalized service than big banks.
When selecting a bank, consider your typical balance, banking habits, and the overall fee structure to ensure you choose the best option for your financial needs. By making an informed choice, you can avoid unnecessary fees and manage your money more effectively.
2. Monthly maintenance fee
A bank is a business, and as such, many will charge you a monthly maintenance fee to keep their operations running smoothly. This fee typically ranges from $4 to $15 or more per month, depending on the bank and the type of account you hold. While these fees might seem small, they can accumulate over time, costing you a significant amount annually.
However, there are ways to avoid these monthly maintenance fees. Some banks will waive the fee if you set up direct deposits, maintain a certain balance, or meet other specified requirements such as using your debit card a minimum number of times each month. For instance, maintaining a daily balance of a few thousand dollars or setting up recurring direct deposits from your employer can often qualify you for a fee waiver. Additionally, some banks offer promotional periods where they waive the maintenance fee for the first few months or even the first year.
Alternatively, you can search for banks that offer no-fee accounts. Many online banks and credit unions provide accounts with no monthly maintenance fees, giving you a more cost-effective banking solution. As we said earlier, the lower overhead costs of online banks allow them to offer more competitive terms to their customers. When comparing banks, it’s essential to look at the overall fee structure, including potential hidden fees, to ensure you are getting the best deal.
3. Excess transaction fees
Banks typically impose a limit on the number of transactions you can make with your savings and money market accounts. Traditionally, you are restricted to six transactions per month. If you exceed this limit, you might incur a fee, which can be around $10 per additional transaction. These limits are in place due to federal regulations intended to distinguish between savings and checking accounts. The idea is to encourage people to use savings accounts primarily for longer-term savings rather than frequent transactions.
It’s important to be aware of these transaction limits and track your activity to avoid unnecessary fees. Many people inadvertently exceed the limit due to automatic payments, transfers, linked accounts, or frequent withdrawals, which can quickly lead to extra charges.
To manage your accounts more effectively, consider transferring a larger sum of money at once to your checking account for more frequent transactions. This strategy can help you stay within the transaction limits of your savings or money market accounts and avoid fees. Additionally, setting up alerts and monitoring your accounts regularly can help you keep track of your transactions and stay within the allowed limits.
Or you can look for a bank that waives this fee. Some do if you meet certain requirements, such as maintaining a higher balance in your account or having other accounts with the same bank.
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4. Overdraft fee
If you spend more than is available in your account, you’ll be charged an overdraft fee. These fees can be quite expensive, with the average being around $26 per transaction. If you don’t realize that you’ve overdrawn your account and continue to make multiple purchases, you could easily rack up $100 or more in overdraft fees in a single day. To make matters worse, some banks charge continuous overdraft fees or daily overdraft fees for each day the account remains overdrawn, adding significantly to the cost.
To avoid these charges, it’s keep a close eye on your balance and set up account alerts for low balances. Most banks offer customizable alerts that can notify you via email or text message when your balance falls below a certain threshold, helping you to take action before you incur overdraft fees.
Another option is to link your checking account to your savings account or a line of credit can serve as a backup. This setup, often referred to as overdraft protection, allows funds to be automatically transferred to cover any shortfalls, usually at a much lower cost than standard overdraft fees.
Regularly monitoring your account through online banking or mobile apps can also help you stay on top of your finances and reduce the risk of overdrawing your account.
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Moreover, some banks offer overdraft forgiveness programs or the option to decline overdraft protection altogether, which means transactions that would cause an overdraft are simply declined. Understanding and taking advantage of these features can save you from unnecessary fees and keep your finances in better shape.
5. Insufficient funds fee
An insufficient funds fee, often abbreviated as NSF fee, is similar to an overdraft fee. However, this fee is specifically charged when a check or automated payment bounces due to insufficient funds in your account. Banks typically charge slightly less for NSF fees compared to overdraft fees, with the average being around $20. Despite being lower, these fees can still add up quickly if multiple transactions are returned unpaid.
To avoid insufficient funds fees, it’s crucial to keep an eye on your account balance and ensure there’s enough money to cover all scheduled payments. Regularly reviewing your account statements and maintaining a buffer in your balance can help prevent unexpected shortfalls. Setting up account alerts for low balances can also be a useful tool, notifying you when your funds are running low and allowing you to take action before a payment is returned.
Overdraft protection services, offered by a lot of banks, can help prevent both overdraft and NSF fees. By linking your checking account to a savings account, credit card, or line of credit, funds can be automatically transferred to cover any shortfalls. This safety net can be a more cost-effective way to manage occasional lapses in available funds.
7. Out-of-network ATM fees
Lots of banks have extensive networks of ATMs that their customers can use free of charge. These networks are designed to provide convenient access to your money without incurring additional costs. However, if you choose to use an out-of-network ATM, you’ll likely be hit with a fee, which can be around $5 per transaction. This fee is often charged by both your bank and the ATM operator, leading to a potentially costly withdrawal.
To avoid these fees, it’s a good idea to familiarize yourself with the locations of ATMs that are part of your bank’s network. Many banks provide maps or ATM locators on their websites or mobile apps, making it easier to find surcharge-free ATMs near you. Additionally, planning your cash withdrawals in advance can help you avoid the need to use out-of-network ATMs.
Another effective strategy is to choose a bank that offers refunds for out-of-network ATM fees. A lot of online banks provide this benefit as a way to attract and retain customers. These refunds can cover all or a portion of the fees you incur when using non-network ATMs.
If you frequently travel or find yourself in situations where you need cash unexpectedly, selecting a bank with a large ATM network or one that offers fee refunds can be particularly beneficial. By being mindful of your ATM usage and choosing the right banking options, you can minimize unnecessary fees and keep more of your money in your pocket.
6. Early account closing fees
If you close your account within a few months of opening it, your bank may charge you an early account closure fee. This fee can range from $5 to $50, depending on the bank and the type of account you have. Banks impose this fee to recoup some of the costs associated with setting up and maintaining the account and to discourage customers from frequently opening and closing accounts.
To avoid this fee, carefully consider your needs and intentions before opening a new account. Make sure you genuinely need the account and plan to use it for the foreseeable future.
Some banks have more lenient policies regarding early account closures, while others may have higher fees or longer minimum holding periods. Reading the fine print and understanding all the terms and conditions before opening an account can save you from unexpected charges.
If you find yourself needing to close an account shortly after opening it, consider reaching out to your bank’s customer service. Sometimes, banks may waive the fee under certain circumstances, especially if you have other accounts with them or a long-standing relationship.
8. Inactivity fees
If you don’t use your account for an extended period of time, your bank may charge you an inactivity fee to keep it open. This fee can range from $5 to $20 per month, depending on the bank and the type of account. The length of time before a bank considers an account inactive can also vary, with some banks waiting a year before they start charging the fee, while others may impose it after just a few months of inactivity.
It’s important to engage in regular account activity. Even if you don’t use the account frequently, scheduling a small transaction periodically can help keep it active. This could be as simple as setting up a recurring transfer of a small amount between accounts, making a small purchase, or depositing a minor sum of money. These actions signal to the bank that the account is still in use, thereby preventing it from being classified as inactive.
If you find that you no longer need the account or are unable to maintain regular activity, consider closing it. Before doing so, ensure that you transfer any remaining funds and update any automatic payments or deposits linked to the account to avoid complications. Closing an unused account can simplify your finances and eliminate the risk of incurring inactivity fees.
9. Paper statements
Remember paper statements? In our digital age, they are quickly becoming a thing of the past. Most banks now encourage customers to opt for electronic statements, and as an incentive, they often charge a fee for sending paper statements, which can range from $1 to $5 per month. This shift not only reduces the costs associated with printing and mailing paper statements but also aligns with broader environmental goals by decreasing paper usage.
Electronic statements are usually free and offer several advantages over their paper counterparts. For one, they are more convenient, as they can be accessed anytime and anywhere through online banking platforms or mobile apps. Secondly, electronic statements eliminate the need to store physical documents, making it easier to organize and manage your financial records.
If you haven’t already made the switch to electronic statements, consider doing so. The process is normally straightforward and you get to save money and contribute to a more sustainable future at the same time.
10. Card replacement fees
Try not to lose your debit card. Besides the inconvenience and the fear of someone unauthorized using it, losing your card can also lead to unexpected charges from your bank. It’s essential to always keep your card in a safe place to avoid these issues. If you’re the type of person who misplaces things often, consider looking for a bank that offers free replacements for lost, stolen, or damaged cards. Fortunately, there are plenty of banks out there that don’t charge a fee for standard card replacements.
Most banks will charge a fee for rushed or expedited card replacements, which can be quite high, ranging from $15 to $30 or more. To avoid these extra costs, try to plan ahead if you know you’ll need a new card soon.
Bottom line
Being proactive and understanding your bank’s fee structure can save you a significant amount of money over time. One of the best ways to do this is by regularly reviewing your account statements for any unexpected charges. This habit allows you to catch any erroneous or unfamiliar fees quickly, giving you the opportunity to address them with your bank. Don’t hesitate to ask your bank about any fees you don’t understand or that seem questionable. Banks often have detailed fee schedules, and customer service representatives can provide clarity on how to avoid certain charges in the future.
Your money is hard-earned, and it’s essential to ensure that you are not losing more of it than necessary to bank fees. By taking the proactive steps mentioned above, you’ll keep more of your money where it belongs—in your pocket.
