Most American adults pay little to no fees to their banks, according to the American Bankers Association.
However, banks continue to make a sizable profit, and fees are a significant source of income. This implies that those who do pay bank fees—paying occasionally tens, hundreds, or even more annually—make up for those who don’t. It’s critical to understand your bank’s fees, how much they’re costing you, and how to prevent them if you pay them.
Regular Maintenance Charges
Some banks charge a monthly fee solely to maintain an account. These bank costs, sometimes referred to as monthly maintenance fees or monthly service fees, can range from $5 to $20 a month, depending on where you bank and the services you choose. 2. Any money you earn on an interest-bearing account over the year can be eaten up by such fees, and you might even struggle to keep your account balance above zero as a result.
There are typically two ways to avoid monthly maintenance expenses.
Use a maintenance-free account that is free to use. There is still free banking available. Big banks increased maintenance fees as a result of a Dodd-Frank Act modification that was introduced following the financial crisis and abolished free checking accounts. 3. However, many banks continue to provide them. Due to the lack of minimum criteria or monthly service costs, online banks provide a quick and simple way to get free banking services. 4, If you desire the advantages of a physical bank (bank branches are still helpful), look for smaller regional banks or other local institutions. Free checking is also available at credit unions, which are owned by their members.
Apply for a fee waiver to avoid paying fees. Fee waivers are simple to understand: the bank won’t charge you a monthly service fee if you meet certain requirements. These five typical standards that let you avoid expenses include:
- Getting your paycheck deposited directly into your bank account (sometimes a minimum amount per month is required)
- keep your account balance over a predetermined amount, like $1,000.
enrolling in paperless statement delivery.
Utilizing various services provided by the same bank (getting a mortgage from the same bank where you hold a checking account, for example)
You run the risk of incurring overdraft fees whenever your account balance falls below a certain level and the bank makes a payment on your behalf. These penalties can be just as expensive as monthly maintenance fees over the course of a year.
The average amount charged by the bank for a declined transaction is $35.
If your account has $1 and you use your debit card to make a $4 purchase (and you’ve enrolled in your bank’s overdraft protection program), you’ll pay $35 only to borrow $3. If you use the ATM again after that, you risk incurring another $35 fee.
Fortunately, overdraft fees are frequently negotiable because overdraft protection is a voluntary service. If you don’t opt in, your card will typically be denied for debit and ATM transactions, and you won’t be assessed an overdraft fee (you can probably pay with cash or another card).
It is worthwhile to look into your alternatives if you are considering overdraft protection. Some banks provide overdraft lines of credit, while others let you move money from your savings account to your checking account (which imposes a fee when you tap the line of credit and charges interest on the amount you borrow).
Opting out is insufficient
If you never choose to use overdraft protection, you could believe you are safe. However, in rare circumstances, if your account balance falls to zero and then charges are applied, you may still be charged overdraft fees.
For instance, you might have authorized your biller to remove money each month by setting up automatic mortgage or insurance payments from your checking account. In contrast to debit and ATM transactions, recurring electronic payments and checks are frequently paid for by banks, which then charge you an overdraft fee even if you didn’t agree to the service.
Steps You Can Take
Keeping track of the amount in your account and the amount you will have next week will help you avoid these bank fees. If you routinely balance your account, you can identify which transactions have already cleared and which ones you are still awaiting. Even while your bank may indicate that you have a particular amount of cash on hand, you are aware that not all of your bills have been posted to your account.
You might want to consider creating an overdraft line of credit as a backup plan. Though it’s hoped that you won’t use it frequently, it’s a less expensive option to deal with erroneous situations.
Insufficient Funds Fees
If you don’t have enough money in your account to cover a check you write or an electronic withdrawal you make, a bank could return it to you as unpaid in specific circumstances. The bank may impose a non-sufficient funds (NSF) fee for the unsuccessful transaction even though it won’t pay the cost. These bank fees normally run about $35 per unsuccessful transaction, just like overdraft fees.
Keep enough money in your account to pay your expenses in order to prevent NSF fines. Set up notifications in your bank account if you find it tough to accomplish that due to a lack of funds or unexpected money withdrawals from bills. So that you are aware, if you need to postpone or cancel payments or transfer money from a savings account, your bank can email or text you when the balance on your account drops.
The majority of people don’t bat an eye when they pay a $10 monthly maintenance charge, but they detest the idea of having to pay to withdraw cash from an ATM. That makes sense since, if you frequently use an ATM, your bank may charge you $2 to $3 for each transaction you make at a machine owned by a different bank.
If you frequently use ATMs, you must find a solution to avoid these bank fees. To achieve this goal, use only ATMs that are owned by or connected to your bank. By doing this, you can avoid paying the “foreign” ATM fee from your bank and the ATM operator. Use the mobile app for your bank.
The number of free ATMs available to you if you use a credit union, even a tiny one, may be greater than you realize. Shared branching, which many credit unions participate in, enables you to access ATMs and branch services at other credit unions in addition to your own. Find out if your credit union is a participant and identify the closest ATMs.
Fees for Wire Transfers
With wire transfers, you can send money without physically exchanging currency by using a bank or non-bank wire transfer provider. They are expensive but excellent for sending money quickly. Domestic outgoing wire transfers typically cost $28.14, while domestic incoming wire transfers typically cost approximately $16.
Select a less expensive method of sending money electronically if you don’t actually need to send a wire transfer. For instance, a lot of banks provide free bank-to-bank transfers. 15
Fees for Early Account Closure
Many banks may charge you a fee of between $25 and $50 when you close an account soon after opening it.
Wait at least three to six months before closing your account to avoid early closure costs, even if you’ve changed your mind about a bank.
Important Withdrawal Fees
Some accounts have monthly transaction caps, particularly for transfers out of the account. Savings accounts have a monthly withdrawal cap of six for certain types of withdrawals under Federal Reserve Board Regulation D.
Plan ahead and transfer the funds to your checking account in larger amounts if you want to make purchases from those accounts. By using this method, you can avoid paying excessive withdrawal fees, which can range from $3 to $20 or more per transaction.
Penalties for Early Withdrawals
Savings accounts often offer lower interest rates than certificates of deposit (CDs). The downside is that you must keep your money in the account for a considerable amount of time. The penalty for withdrawing early is typically equal to the interest that would have accumulated on the original amount withheld over a predetermined number of months (three months’ interest, for example).
Set up a CD ladder to ensure you always have access to funds, or select a no-penalty CD that permits fee-free early withdrawals to save that money.