Banks are businesses and one way they make money is to charge fees. At some institutions, you can be charged fees for practically everything. The best way to pay a bank fee is to understand what fees you already pay and to look for a financial institution with more reasonable fees, if yours are too high. What sort of fees might your bank charge? What are the ins and outs of the most common bank fees? Grab your bank statement and let’s get started.
Account Maintenance Fees – Monthly
The account maintenance fee is very common. You are paying for the privilege of having a checking or savings account. Since monthly bank service charges an average over $13, you spend more than $150 a year just to have to the account.
Shop around to find a no-maintenance fee checking account and try to limit as many of the following fees as possible. Read the fine print so you understand what fees the bank may try to impose. It’s not fun to wade through the tiny print or the legalese, but it is important.
Minimum Balance Fees – Monthly as Warranted
Some accounts have a minimum balance requirement. If you fall below that minimum balance, you are charged a fee for every month you are below the minimum balance, often $500 or $1000 or more. While you may save on account maintenance fees by maintaining the balance, you may not get any interest on the balance. This is essentially an interest-free loan to the bank.
If you can’t keep the minimum balance in your account, find a different account. Check your past monthly average checking account balance to see if this type of account will work for you.
Overdraft or NSF Fees – as Warranted
These fees can really add up. If you bounce a check and it is returned to the vendor, you will pay the bank and overdraft fee and possibly the vendor with a returned check fee. The average overdraft fee is $33. Keep in mind that your bank can clear checks to maximize the number that bounce.
Overdraft Protection Fees – Monthly
If you elect to have overdraft protection, you will pay for the bank to cover the overdraft and save you returned check fees. The national average is $33.
Some institutions will draw cash from your savings account to cover the bounced check (providing there is money in the savings account) and will charge a much lower fee for that service. Check with your bank to see if this is available.
Did you know you may get overdraft fees refunded? Ask politely! The teller may be able to help.
Returned Deposit Fee – as Warranted
If you cash a check from another person and it bounces, your institution may charge you a returned deposit fee. This can also result in overdraft fees if you expect to have money in your account from the check.
Some banks will tell you if there are sufficient funds in the bank to cover the check before you cash it and you may be able to cash it at the checker’s bank. If you deposit it through your bank, the check may not necessarily clear by the time it goes through the check clearing process.
Additional Check Fees – Varies
As soon as you run out of checks, you will have to order more. These can be insanely expensive. At one bank, the cost to ship the checks was twice what it cost to have them printed. You can order checks for a private supplier. The one problem with that is that the ink from these non-approved suppliers can be non-magnetized and cause issues when attempting to cash them at certain venues.
Decide how important it is to you to have fancy checks. No one else cares! The plainer the check the less expensive it is to buy them.
Cashier’s Check Fee – as Warranted
If you plan to use a cashier’s check, you may have to pay a fee. A cashier’s check guarantees that the check will clear. You may use a cashier’s check to pay for large ticket items like a car down payment or if you don’t want to carry a wad of cash. The average fee for cashier’s check is $9.
Paper Statement Fees – Monthly
If you haven’t made the switch to paperless statements, you may be charged between $1 and $5 for the paper statement. This means between $12 and $60 per year for the paper version.
ATM Fees – as Warranted
ATM fees can be incredibly annoying. If you use an out-of-network ATM, both your bank and the ATM’s bank may charge you fees of roughly $4 each. You may be limited to the number of ATM withdrawals that you can make. Some banks will refund ATM fees, so if you use an ATM a lot, it is worth asking about that refund.
Using your debit card at an ATM may make more sense, since you may not be charged a fee for that service, even at an out-of-network ATM.
Using an in-network ATM, a human teller at your bank, or withdrawing larger amounts once a week may be a way to avoid ATM fees. If you know you need cash, avoid possible ATM fees by getting cash back when you use your debit card.
Debit Card Transaction Fees – as Warranted
Occasionally, banks will charge you to use your debit or bank card. These average $1 to $2 per transactions. If you use your debit card a lot, this can quickly drain your account.
If you can’t avoid these fees, use your debit card as a credit card, or just use your credit card.
Lost Card Fees – as Warranted
Lose your debit/bank card and expect to pay $5 to get it back. Unless you want it rushed, at which point it will cost around $30.
Foreign Transaction Fees – as Warranted
If you plan to travel outside the US, be aware that you may get a foreign transaction fee (fx) levied against your account if you use your bankcard/debit card that goes through a foreign bank or currency. These generally average 3% of the total amount of the transactions.
Wire Transfer Fees – as Warranted
If you transfer money using a wire transfer, you may have both an outgoing and incoming charge, $30 and $15 respectively. Wire transfers are great for large sums of money or when you need the money there instantly.
If you use wire transfers a lot, it is worth finding a bank with no wire transfer fees. If you don’t and you have an otherwise perfectly good bank with high wire transfer fees, don’t worry about them.
You can also use ACH transfers (automated clearing house) or P2P (person to person) services. Both are less expensive than a wire transfer but can take longer to reach the recipient.
Savings Withdrawal Fees – as Warranted
These fun fees result when you make more than six withdrawals from your savings account each month. If your bank offers overdraft transfers, these count toward the withdrawal limit. The fee for more than six withdrawals averages $15 per withdrawal.
Inactivity Fees – as Warranted
If you don’t periodically use your checking or savings accounts, you may have an inactivity fee. These generally start after 6 months of inactivity. The fees can slowly eat up your account until you either reactivate it or the balance reaches zero. The average inactivity fee is $10 per month.
Account Closing Fees – as Warranted
Account closing fees are generally assessed against accounts that are closed before 6 months of the opening date. You may pay as much as $25 per account.
Negative interest or NIRP is not common in US financial institutions. Basically, you pay the bank to use your money. You may see the same effect as NIRP if you use an institution with no interest and high fees.
Make your money work for you and not your bank by knowing about the fees they charge. Look for a financial institution that is more in your favor. The advent of on-line banks means lower fees in many instances (at the cost of some convenience), so don’t let living in a one bank town or neighborhood stop you from getting the best financial institution for your needs!