The same is not true with banks. You must examine a number of factors when deciding where to park your money in order to choose the best option. Fees are one important factor you should think about.
For their services, financial institutions charge a variety of fees, some of which you might not even be aware of until you see a charge in your account. The good news is that you can save expenditures over time by understanding the fees your bank levies and how to avoid them.
Why do banks charge fees?
Any costs your bank levies on you in exchange for your business are known as bank fees. You’ll frequently encounter expenses including as overdraft fees, paper statement fees, and ATM fees. If you’re thinking about opening an account with a new bank, take some time to look over their website or even stop by a branch in person to learn more about all the possible costs you might encounter.
Overdraft and non-sufficient funds (NSF) fees produced an estimated $15.47 billion in revenue for banks in 2019, according to data from the Consumer Finance Protection Bureau.
8 standard bank fees
The Truth in Savings Act mandates that all financial institutions reveal the fees they charge clients and when they apply. Consumers were given an additional degree of safety with the implementation of this, making it simpler for them to comparison shop and select the best bank account for their need.
The most frequent charges made by banks are listed below, along with tips on how to avoid them:
Recurring monthly service charge
This fee is what banks charge to cover the monthly expense of keeping your account open. If you keep a specific amount in your account, some banks won’t charge a monthly fee at all or will waive it.
Others could demand as little as a few dollars or as much as $15. A low- or no-fee account may enable you to save more money, but it can also include a set of restrictions. For instance, the number of withdrawals you can make each month from some low- or no-fee accounts may be limited. When deciding which account best suits your spending style, keep this in mind.
To prevent it: Make a wise choice for your account. Ask your bank whether they impose a monthly maintenance fee and what requirements must be met in order for them to waive it. You might be able to avoid this cost entirely if you can maintain a minimum balance or use your account for a predetermined amount of purchases each month.
ATM service charges while using a different network
Each bank maintains a network of ATMs and won’t charge you more to use one to withdraw money. However, you’ll probably be charged a fee if you leave that network and use an ATM run by another bank or a third-party service provider. You will pay an average of $4.66 for these fees, which may not seem like much if you need money right away. It might eventually mount up, though, if you intend to make several withdrawals.
How to prevent it: If you have no choice but to use an out-of-network ATM, try to withdraw a bigger sum of money to prevent making several withdrawals quickly and incurring more costs than necessary. Consumers should be aware of account terms, as with any financial service, according to Greene. “ATM fees are typically waived, for instance if the ATM is within the network, and some institutions also offer waivers or refunds when the ATM is not within the network.”
Charge for overdrafts
When you spend more than what is in your account, most banks will assess a fee. For instance, if you have a balance of $100 and spend $150, the bank will execute the transaction, but you’ll be responsible for the $50 it financed as well as a fee for going overdrawn on your account.
Although the overdraft cost varies from bank to bank, it might reach $35 per transaction. If you don’t routinely check your account, you can find yourself shelling out hundreds of dollars in fees for even the tiniest transactions.
To prevent it: Create account alerts so that you’ll be informed whenever you use your card to make a purchase or when it falls below a specific amount of money. You’ll ensure that you consistently have enough funds in your account to cover your transactions in this manner.
Another choice is to find out if your bank provides overdraft protection. When you enroll, your bank will transfer the necessary funds to cover your purchase from a connected or secondary account into your account. If you want to use this function, you’ll probably need to pay a monthly fee, but you might still be able to save money by spending a few dollars a month to make sure that any purchases that might cause your account to fall below zero will still be allowed and not result in an overdraft fee.
Paper statement costs
You can be assessed a fee by your bank each billing cycle if you want a physical copy of your bank statement sent to you. The monthly fee is often between $1 and $5, but if you don’t read your paper statement, it could be a waste of money.
To prevent it: Enter your bank account information and check your settings. Enrollment in paperless statements need to be a choice. Some banks don’t charge a fee to send you a paper statement if that is what you still prefer.
Wire transfer charges
Although wire transfers let you send money instantly to another person’s account, they are not free. Whether the person you’re sending money to uses the same bank as you or if you’re transferring it to a bank account in a different country will affect the cost you pay. You could be assessed fees by banks for receiving a wire transfer.
How to prevent it: The best way to get around it is to transmit the money online rather than contacting customer care, as some financial institutions will eliminate this cost or give you a discount. Consider using a paper check or a mobile payment tool like Venmo or Zelle as alternatives to transmitting money.
Account closure charges
If you close your account within a predetermined time period after opening it, some banks will charge you a closing fee. This is done in order to keep customers or stop new customers from taking advantage of initial benefits before switching to another bank. The majority of financial institutions, though some have shorter time frames, will impose this fee if you end an account that is less than 180 days old.
How to avoid it: Before creating an account, confirm that the bank you select will satisfy your long-term demands. Try to persevere if you ultimately decide it’s not for you past the cutoff time to avoid having to pay an account-closure charge.
Dormancy charges
Banks have a set length of time after your account becomes dormant to encourage you to use it before the government intervenes and has the authority to decide what happens to the money in your account. Typically, banks won’t assess a dormancy fee until you haven’t used your account for at least six months.
How to prevent it: Take into account using this account on a regular basis for deposits or withdrawals. To keep this account open and operational even if you aren’t using it frequently, you can arrange one of your regular recurring payments from it. To prevent paying too many monthly inactivity fees, think about deleting the account if you discover that you no longer need it.
Expatriate transaction costs
A foreign transaction fee will probably be charged whenever you buy something from an international merchant in a foreign country or online. This fee, which is charged as a small proportion of the whole transaction and typically ranges from 1% to 4%, is split between your credit card issuer and your credit card network.
How to prevent it: You can prevent it by knowing which banks don’t charge foreign transaction fees. However, if you frequently travel or buy online, opening a new account with a bank like Capital One or HSBC may be worthwhile. Both banks waive foreign transaction costs when you use certain items to pay for your purchases.
The main idea
Your choice of bank might have a significant impact on the amount of fees you pay. Be picky about where you put your cash, and if you discover that you’re paying more in fees than you’re comfortable with, it could be time to switch.
