Banking can get expensive, but avoid those pesky fees with these tips from Wise Bread.
In recent years, we’ve seen a lot about the rising costs associated with banking. Looking for ways to increase profits, banks are turning to fees at an increasing rate. Indeed, fees represent one of the major sources of revenue for many banks, and a recent survey from MoneyRates.com points out that fees are in fact on the rise.
Some fees, such as overdraft fees, are obvious, while others might be a bit sneaky. In any case, it’s important to pay attention to the terms and conditions of your account, and check your statements and communications from your bank for information about fees.
If you have any questions about fees related to your account, speak with a teller or other bank representative. In the meantime, though, keep an eye out for these 12 annoying bank fees, and do your best to avoid them.
Related: Avoid Bank Fees
1. Overdraft Fee
This fee is charged when the bank clears a transaction even if there isn't enough money in your account. According to Consumer Reports, the average bank overdraft fee is approaching $35.
You can decline overdraft services and avoid the steep fee, but that means your debit card transaction will be denied. Another option is to link your checking account to a savings account or a line of credit. Money is automatically transferred into your checking account to cover the overdraft. There is often a fee for this transaction, too (usually $5 plus interest charges on a line of credit), but it’s much smaller than paying an overdraft fee.
Of course, the best defense is to track your spending and make sure you have enough money in your account.
Read on for more.
2. Insufficient Funds Fee
When you have a "bounced" check, this can result in an insufficient funds fee. Before the check clears, you have enough money in your account for other transactions to go through. However, once your check clears, all of a sudden that money is gone. Not only does your check bounce, being sent back to you without being paid, but you have to pay an insufficient funds fee of as much as $35 or more.
In many cases, it depends on the order your transactions are processed. Some banks don't process all your transactions until the end of the day, and they might order them by type, chunking checks together, and chunking debit transactions together. If you have $100, write a check for $60, and have three debit transactions for $30 a piece, the order matters. If the bank settles debit card transactions first (total of $90), you will have one fee when the check clears. However, if the bank starts with the check, you will end up with three insufficient fund fees.
Once again, your best defense is to carefully track your spending so that you avoid going beyond your available funds.
3. Service Fee
These are fees that are charged monthly or annually, and are charged simply because you have an account. These fees can be charged on checking accounts and on savings accounts. Consumer Reports says that the average fee is right around $10 a month.
Some banks make it less obvious by charging an annual fee instead of a monthly fee. Realize that the fee will be taken out of your account automatically — and that it could potentially trigger an overdraft.
Avoid service fees by looking for banks that offer free checking or by finding out if you can have your service fees waived by meeting certain conditions, like maintaining a minimum balance, or engaging in a certain number of transactions.
4. Returned Deposit Fee
This is one of the most depressing fees charged by some banks. This is a fee that is charged when a check someone writes you bounces. When such a check is returned, the money you thought you had (and might have already spent) is taken back out of your account. And then you might be charged between $15 and $25 — or more — on top of it for someone else's mistake.
If you want to avoid these fees, you will have to accept cash, money orders, or cashier’s checks. For long-distance business transactions, you can use a service like PayPal to ensure that the money is already there before you deposit it in your account.
5. Minimum Balance Fee
Some accounts require that you maintain a minimum balance. This is especially common for interest-bearing checking accounts, money market accounts, and some savings accounts. However, you can find a minimum balance requirement with any account.
When opening your account, ask the teller for the specifics on the minimum balance requirements. Find out how the fee is figured. There are three main possibilities:
- Average monthly balance. Your average balance for the month is figured, and if the average is less than the minimum, you are charged a fee.
- End of the month. In some cases, the bank just looks at your balance on the last day of the month, and if you have the minimum, you aren't charged a fee.
- Balance drops below the minimum. The most stringent policies will charge you a fee if your balance drops below the minimum at any time during the month, even if it is only for a day.
Avoid this fee by maintaining the minimum balance, or by switching to an account without minimum balance requirements.
6. Account Closing Fee
Believe it or not, some banks charge you a fee when you decide to close the account. This fee is often right around $25. Some banks charge a fee no matter how long you have had the account. Other banks won't charge you the fee if you wait a certain period of time before closing the account, often 90 days.
Ask the bank teller how soon you can close the account without incurring a fee. Wait that period of time before you close the account. If the bank will charge a fee regardless, you just happen to be out of luck (and $25).
7. Inactivity Fee
Some consumers might try to avoid an account closing fee by just leaving the account open and not closing it. Unfortunately, this won't work if the bank charges inactivity fees. If you don't use your debit card or have a deposit made for a certain period of time, your account can be labeled inactive — and the fees can start coming out, usually to the tune of between $5 and $15 a month.
Find out whether or not the bank charges an inactivity fee, and then make sure you perform the minimum transaction requirements in order to avoid it.
8. Lost Debit Card Fee
If you lose your debit card, you may have to pay between $5 and $10 for its replacement. If you want that debit card rushed to you, it could cost an extra $20 to $25. Keep track of your debit card, and, if you lose it, use other means of payment while you wait for a new one.
9. Online Bill Pay
Using online bill pay can be a rather convenient way to take care of your bills. However, some banks view it as a way to make a little extra money off your desire to make things easy. Consumer Reports points out that it costs almost $7 per month, on average, for customers to use online bill pay. Some banks offer this service for free, so shop around.
10. Paper Statement Fee
This is a rather small fee, relatively speaking, but it can start to become annoying over time — getting a paper statement usually costs $1 or $2 a month. Look at your bank statement carefully for this fee. If you are being charged for your paper statements, switch to paperless. Your bank account — and the environment — will thank you.
11. Foreign Transaction Fee
Many banks tack a foreign transaction fee onto your purchases when you use a debit card or credit card issued by the bank. This fee is often 3 percent of the purchase price. Sometimes, this fee is charged even if you make a purchase online from someone in another country and a currency conversion has to take place.
Some banks, like Capital One and Chase, don't charge these fees on several of their credit cards. Double check your options to see if you can avoid this fee.
12. ATM Fee
When you use an ATM, you might be charged a fee. Many banks won't charge you a fee if you have an account with the bank, but it's another story if you use a different bank’s ATM. In these cases, you might be charged twice. You'll be charged by your own bank for going out of network, and you'll be charged by the other bank for not being a customer.
According to Consumer Reports, the average ATM fee is approaching $3. So, if you withdraw $20 from another bank's ATM, you could be charged $3 by your bank and $3 by the bank that owns the ATM. Your fee amounts to $6 — that's nearly one-third of the amount you got in the first place!
You can avoid ATM fees in some cases by making sure that you have the cash you need before you travel. You can also get cash back when making debit purchases at a store to avoid fees. You can also look for a bank that will refund ATM fees.
By carefully shopping around, and even considering credit unions, it is often possible to reduce the fees that you owe — or avoid them altogether.
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