Understanding Bank Fees and How to Avoid Them

 

Bank fees can be one of those sneaky things that nibble at your finances when you are not paying attention. From maintenance charges to ATM fees, these can add up rather quickly. The good news is that with a little knowledge and proactive steps, you can minimize or even eliminate these fees entirely. Here's a guide to understanding common bank fees and how to avoid them.

Common Types of Bank Fees

1. Monthly Maintenance Fees

• What They Are: Most banks will charge a simple monthly fee just for having an account with them. 
• How Much: Normally ranges from $5 to $25 per month. Why They Exist: To pay operational costs. 

2. ATM Fees 

• What They Are: A fee charged for using an out-of-network ATM. 
• How Much: Usually $2 to $5 per transaction. 
• Why They Exist: To offset the cost of maintaining ATM networks. 

3. Overdraft Fees

• What They Are: Charged when you spend more than you have in your account.
• How Much: Generally around $35 per overdraft.
• Why They Exist: As a fine for having inadequate available funds.

4. NSF Fees (Non-Sufficient Funds)

• What They Are: Just like overdraft fees, charged when a payment is returned due to a lack of funds.
• How Much: Typically $30 to $35 per occurrence.

5. Excess Transaction Fees

• What They Are: For excessive withdrawals or transfers above the limit from a savings account.
• How Much: Around $10 per transaction over the limit.

6. Foreign Transaction Fees

• What They Are: Charges for using your card abroad, or making a purchase in foreign currency.
• How Much: Normally 1% to 3% of the transaction amount.

7. Paper Statement Fees

• What They Are: For the privilege of getting bank statements on paper instead of digitally.
• How Much: $2 to $5 per statement

How to Steer Clear of Bank Fees

1. Choose the Best Bank

• Only choose banks or credit unions that are no-fee or low fee.
• Online Banks have fewer charges than traditional Banks.

2. Maintain Your Minimum Balance

• Almost all banks are not charging their maintenance fees for keeping a minimum in your account
• Set up the alerts to monitor your balances and avoid letting it go lower than the minimum level required.

3. Use In-network ATMs

• Stick to your bank's ATM network to avoid surcharges.
• Use your bank's app or website to find nearby in-network ATMs.

4. Sign Up for Overdraft Protection

• Link your checking account to a savings account to cover overdrafts automatically.
• Some banks offer overdraft protection plans with lower fees.

5. Monitor Your Transactions

• Go through your account activity regularly to identify any unnecessary fees.
• Set up notifications for low balances or unusual transactions.

6. Go Paperless

• Save money on paper statement fees by going electronic.
• Access your statements online or through your bank's mobile app.

7. Mind Savings Account Limits

• Limit your withdrawals and transfers to the allowed amount per month.
• Use your checking account for more active transactions.

8. Plan Ahead for Travel

• Inform your bank ahead of time of travel to avoid foreign transaction fees.
• Consider using a credit card that doesn't charge foreign transaction fees.

9. Negotiate with Your Bank

• If you are charged a fee, call your bank and request a waiver, especially if this is a one-time occurrence.
• Long-time customers or those with more than one account may have some bargaining power.

Other Ways to Keep from Paying Fees

• Set Up Direct Deposit: Many banks waive fees if you have a direct deposit in the account.
• Understand Your Account Terms: Read the fine print to understand exactly what fees you may be charged.
• Consider Switching Banks: If your current bank charges excessive fees, look for better options.

The Cost of Not Avoiding Bank Fees

Bank fees might seem small individually, but they can add up significantly over time. For example:

• A $12 monthly maintenance fee equals $144 a year.
• Using an out-of-network ATM twice a month at $3 per transaction costs $72 annually.

You can divert this money into savings, investments, or any other financial goals by being proactive.

Conclusion

Understanding bank fees and how to avoid them is the secret to retaining most of your hard-earned cash. Knowing what to do and taking simple steps will help you avoid unnecessary expenses. Take charge of your finances today by removing costly bank fees from your life.