The list of fees that banks might charge you is pretty darn long and, on average, they can cost you more than $161 per year. Per year.
Some of the more typical bank fees include monthly maintenance fees, overdraft charges, returned item fees, ATM fees, and foreign transaction fees. Some of these charges, such as the overdraft and returned item fees, can hit people the hardest when they have the least amount of money available to pay them.
So, if you’ve ever been frustrated by having to pay bank fees, or have been surprised when a charge showed up on a bank statement, this post will share tips on how to avoid those fees in the first place.
And, when thinking about bank fees, here’s something else you could consider: Picture what you would do with an extra $161. Save it? Buy something special? Also, think about how long you’ve had a particular account. If it’s been 10 years, for example, imagine how you’d spend an extra $1,610! That’s money you could put back into your pocket.
At the end of this post, you’ll find a possible way to avoid paying bank fees altogether.
Monthly Maintenance Fees
If your bank or financial institution charges maintenance fees, you may be so used to watching that money disappear out of your account each month that you’ve simply stopped trying to figure out how to make it stop.
It isn’t unusual for banks to charge about $12 a month in maintenance fees, nearly $150 a year for this fee alone.
If you keep a large enough balance in this account, you can typically avoid paying a monthly maintenance fee at many banks. That’s great for those who have that kind of money, but this is the type of fee that often hits those who don’t have a lot of money in their accounts.
If keeping a larger balance in your account isn’t practical right now, then it can make sense to explore online-only financial institutions that are more likely to not charge this fee.
Online-only banking doesn’t mean banks that they offer mobile services, though—it’s banks that don’t have a physical location and are online only, who have less overhead and, therefore, the opportunity to pass on more savings to you, the customer.
Banks often have an overdraft program, so if you withdraw more than what’s currently available in your account, the bank won’t “bounce” the check. Instead, it will be covered, but often with a fee attached.
So, let’s say that you deposited $200 in your checking account but $100 of it has a short-term hold on it. This means that, even though you have $200, only $100 is currently available. This is a common practice among financial institutions. So, if you withdraw $150 during this time, you could be charged an overdraft fee, depending upon your bank’s policies.
These types of fees can average around $35 per instance. To avoid being charged, you could decline to sign up for overdraft service (which may lead to bounced checks or declined debit card transactions).
Or you could ask if your bank has a service where, if you overdraft on your checking account, then the amount would be covered from your savings account. Note, though, that this kind of transfer may also come with a fee.
What may be most important here is, you may want to be clear about what your bank or financial institution will do in a certain circumstance. Let’s say that you’ve signed up for automatic bill pay at your bank. What will your financial institution do if there aren’t enough funds?
Pay it anyway and charge you an overdraft fee? A little research with your own financial institution could reveal the answer, and if it’s not what you want to hear, you could see if another institution handles the situation in a way that works better for you.
Returned Item Fees
If you don’t opt in to have overdraft protection on an account, banks typically decline, or bounce, the transaction if there aren’t enough funds to cover a transaction.
Besides the problems associated with a bounced check, there is typically a returned item fee, averaging around $35 for each occurrence. And, unfortunately, sometimes a returned item fee can take an account balance to the point where another check may bounce, causing the situation to become increasingly worse.
ATM fees come with unique pain points that can be especially frustrating. That’s because you sometimes have to pay a bank or a random ATM just to get your own money! And sometimes you’ll pay ATM fees twice on the same transaction: once in a surcharge by the ATM being used and, second, by the bank that issued your card.
To make matters more frustrating, out-of-network surcharges from ATM owners keep increasing, becoming the highest to date in 2018. In fact, it’s 36% higher than it was almost a decade ago, with an average out-of-network ATM charge costing users around costing users around $4.68 , on average!
This situation isn’t especially likely to change, because the very nature of an out-of-network surcharge means that people getting socked with extra fees are non-customers.
If you’re trying to budget carefully, this can be painful. To reduce how much you could pay in ATM fees, pre-planning might help. You could research locations of in-network ATMs and only make withdrawals there.
If you know you’ll be shopping at a business or attending an event that operates as cash only, you could withdraw more than you might need, just in case, so you can avoid using an out-of-network ATM nearby.
When you go into a store, pharmacy, and so forth, you could also check to see if the ATMs located in them are part of your bank’s partnership network. Even if you don’t need cash right away, it might be a good idea to file away that information for when you do need it.
Here’s another idea: Many grocery stores and even some big box stores will let you get cash back when you make purchases there. This could be another way to circumvent ATM fees.
Foreign Transaction Fees
If you’ll be going abroad, then you will likely need to deal with foreign transaction fees. Credit card companies add these onto transactions processed by or passing through foreign banks.
A typical fee is 3% of the transaction amount. There is often a fee charged by the credit card network and another one by the card issuer. Some credit card companies charge fees in addition to network ones, while others don’t.
Credit card issuers typically don’t mention these fees up front (unless they’re advertising that they don’t charge them), so they can come as a surprise when the next statement arrives.
Just one foreign transaction fee might not seem like a big deal, but when you consider how many times you might use a credit card during a trip, it can really add up. And, often, you don’t earn any credit card rewards on these fees.
Returning to the painful subject of ATM fees, banks often charge an additional 1% to 3% for this type of fee on international transactions, meaning beyond what you’d normally pay on ATM withdrawals and debit card purchases.
To help mitigate these fees, you could check with your bank to see if they have affiliate banks in regions where you’re traveling and ask if you can withdraw from those ATMs without paying the additional international fees. You could also ask if your bank reimburses fees that you’ve paid.
As another way to reduce bank fees, you could exchange US dollars to foreign currency before you leave the country, perhaps eliminating the need for ATM withdrawals while traveling. Your bank might do this with no fees.
With online-only banking, there are no physical branches, so overhead costs for the financial institution can be lower, giving them the ability to provide certain perks to customers, such as lower fees.
Sometimes, certain fees aren’t charged at all. Just like with traditional banks, policies differ from one online-only financial institution to another.
If this sounds appealing, you could consider investigating how online-only institutions might help you avoid fees. Many, for example, provide ATM services for free or refund ATM fees up to a certain amount each month.
Money and Millennials
A Kasasa study points out that an overwhelming percentage of millennials they surveyed—93% of them—say that fee-free banking is important to them. They note that no-fee banking matters to them when choosing a bank for everyday banking needs.
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