In order to avoid common bank fees, it’s necessary to have a good understanding of what they are.
One of the less desirable aspects of having a checking or savings account is dealing with bank fees. The contract stipulating the terms of any bank account contains a variety of conditions in which banks can levy a fee or penalty payment on account holders.
These fees can often catch account holders off guard, especially if they didn’t read the fine print when signing up for an account. And banks aren’t particularly incentivized to highlight these fees when signing up new account holders.
10 Everyday Banking Fees
An informed customer is able to make the best choices for their financial well-being and security.
Like with any type of banking or finance, the most important factor is being aware of the conditions of the contract. Bank fees, payday loan interest rates, credit card interest rates, terms and conditions of online payday loans, and other types of financial instruments all take some time to understand fully.
Here are 10 of the most common types of fees banks will levy against cardholders. Some only apply to niche situations that don’t come up frequently, such as travel in a foreign country. Others are applicable to nearly everyone, like monthly maintenance fees and ATM usage fees.
Monthly Maintenance Fees
One of the most commonly found fees are maintenance fees, frequently charged on a monthly basis. Banks charge maintenance fees to cover the routine cost of maintaining a savings or checking account.
There are a number of ways an account holder can circumvent monthly maintenance fees, though it varies by bank and account.
- Some banks waive monthly maintenance fees if the account holder exceeds a certain minimum balance.
- For some checking accounts, the bank will waive the maintenance fee if the account holder makes some minimum number of transactions during that time period.
- It’s possible to find banks offering a no monthly fee bank account. However, it’s worth noting that these types of accounts often carry other stipulations or conditions, which can lead to fees in other areas. Banks with no monthly fee for checking accounts may only offer these accounts to people who meet certain preconditions or qualifications.
Banks that don’t charge fees will often have other areas in which account holders might end up being charged fees. For example, no fee bank accounts are often offered by banks that notably lack coverage for ATM withdrawals. If an account holder can’t find an ATM associated with that account, they are likely to incur ATM usage fees.
ATM Usage Fees
Using an ATM can often hold a hidden cost – sometimes a fairly substantial one. When using a card associated with a given checking or savings account on an ATM affiliated with another bank, bank charges are incurred.
These charges generally are levied by both the bank operating the ATM and the bank operating the checking or savings account. These charges can be in excess of $3 to $4 from each of the banks. That means taking $20 out of an ATM might carry a hidden surcharge of up to 40%.
The most reliable way to dodge ATM usage fees is to use ATMs associated with the bank operating the savings or checking account. This may not be convenient at all times, though, especially with banks not offering robust ATM coverage. The failsafe measure for avoiding ATM usage charges is to carry an amount of emergency cash that can be used in situations where cash is needed, and no ATM of the right type can be found.
Insufficient Balance Fees
An insufficient balance fee is levied when the account holder attempts to draw on the savings or checking account in an amount in excess of the current balance. For instance, if the balance of a checking account is $75 and the account holder writes a check for $80, this triggers an insufficient balance fee.
These types of fees tend to be regressive, targeting those who often have very little in the way of excess funds. The good news is that there are a number of ways by which account holders can decrease the odds of incurring insufficient balance fees.
- The rise of online banking and the internet means it’s far easier to check on an account’s balance than it was in the past. Rather than having to keep a monthly budget in which an account holder is calculating debits and credits by hand, they can now simply log on and view their current balance with the tap of a few buttons. And with the advent of smartphones and mobile devices, it’s possible to check an account balance from a store before charging a purchase to a given account to ensure it won’t drop below zero.
- Another way account holders can protect themselves from insufficient balance fees is to take advantage of low balance alert services. Especially in this digital age, more and more banking is processed electronically, and this can work to the account holder’s advantage. Many banks allow customers to set up automated alerts that will result in an email or text message when an account drops below a certain level. This can help account holders know when they are close to incurring an insufficient balance fee.
- Another option is overdraft protection. This is an increasingly common feature offered by most of the major banks. Overdraft protection does come with its own set of potential fees, however.
Overdraft protection covers an account holder if they attempt to make a withdrawal or payment from an account that would drop the balance into the negative. If an account holder has overdraft protection, money may be rerouted from another account with a positive balance to cover the discrepancy. Or, the bank may temporarily cover the discrepancy on the account holder’s behalf.
Usually, triggering overdraft protection will incur a fee from the bank, often in the range of $25 to $35. Like with insufficient balance fees, overdraft fees tend to hit account holders who are frequently struggling with money.
Low balance alerts are one of the best ways to avoid overdraft fees. An additional failsafe can be making sure that any backup accounts have a healthy surplus of funds.
Excessive Transaction Fees
Savings accounts and money market accounts are generally not designed for frequent withdrawals. In fact, many banks will charge a fee should the account holder withdraw more than some set number of times within a month or other specified time period.
Fees may escalate with each successive transaction.
In cases where an account holder is incurring excessive transaction fees, it’s likely that they’re not using the savings account properly. Savings accounts are accounts geared toward saving money for the medium to long term while allowing for easy access in the case of emergencies or unforeseen expenses.
People should be handling daily expenses from a checking account. Anyone who plans to transact their routine expenses via check or electronically should have a checking account in addition to any savings accounts.
Card Replacement Fees
When an account holder loses a credit or debit card, they may incur a nominal fee to receive a replacement.
Typically, a bank will offer to replace a lost or stolen card at one fee for rushed delivery, and a lesser fee for a slower delivery timeframe. Frequently, people who lose their credit or debit cards need a replacement fast, meaning they’ll opt for the more expensive fast delivery option.
It’s more or less impossible to avoid the card replacement fee aside from managing never to lose a credit or debit card. However, keeping a backup checking account can mean there will be less need for rushed delivery on a replacement card, thus saving a small amount of money.
Account Closure Fees
Many banks will require that new accounts stay open for a period of time. If the account holder wishes to close that account prematurely, the bank will levy a fee to do so.
The timeframes specified can be anywhere from 90 days to 180 days to a full year, depending on the bank and type of account.
If opening an account, it’s a good idea to inquire as to the timeframe after which no account closure fee will be assessed. This is especially true if it’s foreseeable that it might be necessary to close the account within a short period of time.
Many banks charge a fee if the account in question remains dormant for a given period of time. These time periods tend to be on the long side – often a year or two. If an account hasn’t seen any activity by the set deadline, the bank will assess a fee and then transfer the contents of the account to the treasury of the state in which the account was founded.
Avoiding these fees is simple enough. The account holder just needs to make a token transaction every year to two years. It’s wise when opening an account to look into what that dormancy threshold is, and then make a point of setting up reminders if the account will be inactive for months at a time.
Like with low balance alerts, some banks will offer a feature by which account holders can receive an alert after a certain period of time with no activity.
Paper Statement Fees
Increasingly, banks prefer to do much of their business online. To incentivize customers to do the same, they sometimes assess a fee to those who prefer to receive a mailed paper bank account statement. While many customers are long used to receiving a paper statement as a free service, this is frequently no longer an option.
The best way to dodge this fee is to accept the new status quo of receiving a bank statement online rather than through the mail. If for whatever reason it’s desirable or necessary to have a paper copy, it’s possible to print an online statement with a home printer.
Not receiving a paper statement does have one side benefit. Scammers and identity thieves can’t search through the trash and find a bank statement and the information contained within. This has long been a way criminals have gained sensitive financial information from potential victims, and online statements take that opportunity away.
Foreign Transactions Fees
For account holders traveling in another country, foreign transaction charges can be an unexpected expense. Frequently, banks apply these charges to all transactions made using a given credit or debit card, and the industry-standard is approximately 3% of the amount being transacted.
That kind of fee can add up quickly for an account holder spending significant amounts of money on a trip or vacation.
There are several ways to avoid foreign transaction fees.
- The first is to specifically make sure to open an account with a bank that does not charge foreign transaction fees. This can be especially important for people who know they will be making frequent trips out of the country. If this is a priority, find a bank account that will accommodate this.
- Certain credit card issuers offer cards that do not charge a transaction fee. One option is to use one of these cards on the trip, and then pay off the balance before accruing any interest.
- Another way to get around foreign transaction fees is simply to carry cash of the currency native to the country being visited. However, this can be somewhat risky, as people carrying cash are more likely to be victims of theft.
Banks big and small are known to charge fees whenever possible. When trying to figure out the best options for personal finance, it is important to figure out how to avoid banking fees.