The Top 10 Most Common Banking Fees & How to Avoid Them
Surprise! You view your bank account and see an unexpected fee. You have budgeted very carefully and just can't spare the extra cash to pad your bank's pocket – nor do you want to pay. What are the 10 most common banking fees, and how can you avoid them?
You may encounter banking fees for the following: account maintenance, minimum balance, overdraft, online access, paper statement, ATM, foreign transaction, card replacement, inactivity, and early closure. The best way to avoid these fees is to understand your bank's policies.
Discover more about these 10 fees so you know what to expect at your current bank, or what to look for if opening a new account.
The 10 Most Common Bank Fees
Account Maintenance Fees
Many banks have standard fees for various accounts; especially checking accounts. Some banks offer a variety of checking accounts that offer various services, such as a set number of transactions permitted each month without incurring additional fees.
Some banks offer basic free checking, free checking with a minimum balance, or free checking with a minimum monthly automatic deposit. Credit unions often offer free checking as well. If you have encountered a maintenance fee, ask your bank if there is a minimum balance to avoid the fee, or seek out a bank or credit union with that offers no maintenance fee accounts.
Minimum Balance Charge
As mentioned above, some accounts are free if you maintain a minimum balance. If you thought your account was free and then a new account maintenance fee appeared, it is possible that your balance dropped below the allowable threshold for a free account.
This is often an average monthly balance, meaning if you averaged the minimum balance throughout the month, you won't be charged if your account falls below it.
Know your minimum balance and whether you will be charged based on the average daily balance, or if the minimum must always be maintained to avoid the fee. If you are unable to maintain your bank's minimum balance, the extra charge is the last thing you need. It may be time to research other banks to find an option that works better for your budget.
An insufficient funds fee, commonly known as an overdraft fee, is charged when you spend more than is in your account. This may include transactions made with your card, automatic debits to your account, or checks you have written.
Some banks offer overdraft protection. Your bank may not charge you if you deposit funds to cover the overdraft in the same business day or may not allow transactions to process if you have insufficient funds.
Be wary of this, though. You may save bank fees with this option, but companies you have paid via check or automatic draft may charge fees of their own if the charge does not go through.
Additionally, banks may allow protection by transferring funds from your savings account if there are insufficient funds in your checking account. Usually, overdraft protection is opt-in only, meaning you must go to your bank and sign paperwork acknowledging the protection and what the consequences may be.
Being proactive is also a great way to avoid overdraft fees. Track your spending carefully, whether with an old-fashioned checkbook registrar or with a budgeting app. Be sure to have a document listing recurring fees and their frequency so they do not come as a surprise. For more ideas on avoiding overdraft fees, check out this article.
Online Access Fee
With so many companies offering discounts for going paperless, it sounds counter-intuitive, but some banks do assess fees for online services. If you prefer to go to the bank in person and keep track of your expenses on a paper registrar, this may not be a concern for you. If you take advantage of technology and online banking, you may prefer a bank that does not charge for online access.
Paper Statement Fee
Most banks prefer online access and digitally accessible monthly statements. This cuts down on their administration, employee, supplies, and postage costs. To encourage customers to go paperless, many banks have began charging a fee associated with receiving a paper statement in the mail.
If it is important for you to have a hard copy of the statement, consider printing it at home or finding a bank that does not charge for paper statements. If you don't mind checking your statement online, sign up for paperless statements if this is a money-saving option at your bank.
Stick to using your bank's ATMs when possible. There is usually a fee associated with using an ATM that is not owned by your bank. Some major banks have expansive ATM coverage, which is helpful if you travel often. Also, many credit unions allow the use of ATMs by members of other credit unions free of charge.
If you must make a withdrawal from an ATM that charges a fee for its use, withdrawal a larger amount to cover many expenses, rather than repeatedly using the ATM. If you know ahead of time that your destination does not have your bank's ATM, travel with enough cash to cover your cash expenses to avoid the fees.
Foreign Transaction Fee
If you are traveling overseas, you may incur transaction fees every time you use your debit card. This can add up quickly with every meal, souvenir, bus fare, and activity! See if your bank participates in the Global ATM Network. In this network, many banks come together to waive ATM fees worldwide. You may also research to find a bank that has an ATM fee reimbursement option.
You may wish to carry enough cash to avoid foreign transaction fees; though this puts you at high risk, especially if someone observes you making cash purchases. Alternatively, you may consider opening a multi-currency credit card to avoid transaction fees and not be dependent on pulling cash from ATMs.
Merchandise and services purchased online from foreign countries will also incur a fee. This includes digital products. Research the fee associated with the foreign transaction before your purchase to be sure you are willing to tag that extra expense onto what you are already paying.
Card Replacement Fee
Many banks will offer a free replacement card once per year for any reason, including damage to the card. Some offer a free replacement card if you report your card lost or stolen. Others will charge you every time you need a new card prior to the expiration of your previous card.
Ask your bank about their replacement card policy before you have the need. That way, if you ever do find yourself in a situation where you need a new card, you will know what to expect.
If you have left your account inactive for years, you may be surprised to come back and find your balance much lower than when you left it. This is because many banks charge a fee for account inactivity.
This fee will debit month after month. Eventually, your account may be automatically shut down. It is best to close your account yourself if you do not plan to use it.
Early Closure Fee
Closure fees are often charged when an account is closed prior to six months after opening it, but the timeframe varies depending on the bank.
This fee is meant to prevent customers from taking advantage of sign-up bonuses or other offers without intending to use the bank long-term. Banks want to make sure that their investments pay off with long-term clients.
Whether you are taking advantage of a sign-up bonus or not, ask about early closure fees before opening an account and make sure you are comfortable with the policy.
Final Thoughts on Avoiding the Top 10 Most Common Banking Fees
There are many possible fees you may encounter with your bank account. Becoming aware of your bank's policies is the best way to avoid the fees.
If you are not happy with your bank's fees and policies, the good news is that in most places, there are plenty of other banks to choose from!