Understanding and Avoiding Common Bank Fees

Many people figure that paying bank fees is simply an unavoidable part of life. Recent surveys say the average American shells out anywhere from $167 to $288 per year in fees. But take note: Some or even all of those may be avoidable.

This guide will teach you about common bank charges and help you be a smarter consumer who doesn’t have to pay for all of them. From monthly maintenance to returned item fees, find out how you can save.

Understanding Bank Fees

For many financial institutions, fees are a way that banks make money. They can help cover the cost of being in business, and they can also cover situations that require more of their team’s time (say, dealing with an overdrafted account).

However, these charges can become expensive for many customers, and they can eat away at any interest earned. That can foil a customer’s efforts to grow their wealth.

Next, learn about the specific fees that many banks assess and how you can lower or avoid them.

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 $15 a month in maintenance fees, nearly $180 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 financial institutions that are more likely to not charge this fee. Online vs. traditional banks may not assess these monthly maintenance or account fees. Shop around, and see what’s offered.

ATM Fees

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 you’re using and, second, by the bank that issued your card.

To be specific: Out-of-network surcharges currently average $4.73, which is made up of $3.15 by the machine owner and $1.58 by your own bank, aka the issuer of the card you are using.

If you’re trying to budget carefully, this can be painful. To reduce how much you could pay in ATM fees, planning ahead might help. You could research locations of in-network ATMs and only make withdrawals there. Or use an ATM that’s in-network to get cash before you go shopping or out to eat at a cash-only location so you don’t have to use whichever ATM is nearby.

Here’s another idea for avoiding ATM fees: Many grocery stores and some big box stores will let you get cash back when you make purchases there. This could be another way to circumvent ATM fees.

Overdraft Fees

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 paid, but often you will be charged an overdraft or NSF fee, depending upon your bank’s policies. (NSF stands for non-sufficient funds, and you’ll learn more about this charge below.)

Overdraft 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, 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.

Recommended: Overdraft vs. NSF Fees

Insufficient Funds Fees

Here’s a common bank fee that is somewhat similar to overdraft charges: what are known as insufficient funds, non-sufficient funds, or 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 (that is, the payee not getting their funds), there is typically a returned item fee, averaging around $30 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.

To avoid this bank fee, you might want to adjust your budget to allow for a cash cushion in your checking account, which can help you avoid this scenario.

Wire Transfer Fees

There are times when you may need to send a wire transfer to quickly get funds to an account holder in the US or overseas. Wire transfers can smooth this process. But they may not be free: Wire transfer fees usually range from $0 to $50, with typical fees being $15 for incoming domestic and international transfers and $25 for outgoing domestic and $45 for outgoing international transfers.

A few ideas on avoiding these fees, if your financial institution charges them: Ask your bank if they will waive the surcharge; in some cases, they may. Use a payment service like Zelle, or, if you often make and receive international payments, you might look into getting a multicurrency or foreign currency bank account.

Inactivity Fees

If you have a bank account that you don’t use often, you might get charged what’s known as an inactivity fee or a dormancy if it sits untouched for a while. There are varying state laws that specify when a bank must turn dormant funds over to the state, as a form of unclaimed funds. Dormancy fees try to trigger account holders into action so that this handoff of funds to the government doesn’t happen.

Inactivity fees can typically range from $5 to $20, and the amount of time that must elapse before they are assessed will vary.

To avoid these fees, it’s wise to only have as many accounts as you can frequently manage. If you have an account you barely use, it can be a smart move to close it and transfer any funds to an active account.

Foreign Transaction Fees

If you’ll be going abroad, then you will likely need to deal with credit card 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.

But what about your bank and fees when you travel? Some of them add a similar fee to debit card usage, so it’s wise to check on your financial institution’s policies before you travel. What’s more, banks often charge an additional 1% to 3% on international ATM withdrawals.

To help mitigate or avoid these bank fees (especially if you are a frequent traveler), you could check with your bank to see if it charges these fees. If it does, you might consider opening an account at a financial institution that doesn’t.

Also, perhaps your bank has affiliate banks in regions where you’re traveling, and you could 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. However, then you do risk loss or theft of your funds.

Open a SoFi Checking and Savings Account

If you’re looking for a way to lower the bank fees you pay, see what SoFi offers.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2023 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
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SoFi members with direct deposit activity can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a deposit to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.

SoFi members with Qualifying Deposits can earn 4.60% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.60% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 10/24/2023. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

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