How to avoid 5 common bank fees
A recent survey showed that ATM fees hit a record high for the 15th straight year—proving that while it’s easier than ever to access your money, that ease comes with an escalating price. As these and other bank fees continue to climb, one possible solution is to join the 121 million other Americans who are members of credit unions, where rates and fees usually beat those charged by huge corporate banks. But no matter where you keep your money, here are five common bank fees to look out for—and how to avoid them.
This infamous penalty for not using your own bank’s cash machines is often a two-parter: a near-certain surcharge from the “foreign” ATM owner ($3.09 on average in 2019, according to Bankrate), plus an out-of-network fee commonly charged by your own bank ($1.63). That makes a double-whammy total of $4.72 per out-of-network transaction—which basically means that the $100 withdrawal you just made only netted you about $95.
How to avoid them: The most obvious fix is to use your own financial institution’s network of ATMs. Not possible? Get fee-free cash back when you pay with a debit card at retail spots like supermarkets and pharmacies. But what if you’re forced to use machines outside your bank’s orbit because of frequent travel, or you just can’t resist the convenience of an ATM at the local corner store? Get a card from a bank that both doesn’t assess out-of-network fees, and also reimburses fees charged by the ATM owner—a twofer of fee avoidance! (NerdWallet has a list of such banks.)
If you opt in for overdraft protection, you’ll pay a fee to allow charges to go forward even when you lack the funds to cover a purchase with your debit card or a cash withdrawal at an ATM. Sure, it’s convenient (and can help you avoid embarrassment) to have the bank spot you if you try to access more money than you actually have, but it’s expensive: The average overdraft fee is now $33.36. Adding insult to injury, if you don’t repay the overdrawn amount back to the bank in a timely manner, you could face “extended overdraft” charges—typically kicking in within five days—of between $15 and $35.
How to avoid them: Don’t opt in for overdraft protection. And if you’re already opted in, opt out. As inconvenient as it may seem, it’s better in the long run to have your transaction declined and wait until you have the money to make that purchase. (Don’t worry about this affecting your credit, by the way. Debit card use is not a factor in your credit score.)
Account maintenance fees
Real talk: “Free Checking” often isn’t free. Depending on your bank and the details of your account, you could get hit with this fee if you don’t maintain a certain minimum daily balance—either at the end of each day, or on average for the month. According to a Bankrate survey, these fees average $5.61 per month for customers who don’t maintain the minimum, which averages $622.
How to avoid them: Most banks waive account maintenance fees if you sign up for direct deposit—with the added benefit that your paychecks will be available instantly. (While you’re at it, arrange to have a portion of each check funneled to an emergency savings account.) If this isn’t possible, set up alerts through your bank’s app to notify you when your balance falls below the all-important minimum so you can act quickly—ideally by the end of the business day—to correct it and dodge the fee.
Excessive transfer fee
For savings accounts only, federal regulations limit transfers or withdrawals to six per month. Exceed that and you could be subject to this fee (up to $15 per violation), or even see your account converted from savings to checking. (The Federal Reserve instituted the rule, called Regulation D, to encourage customers to use their savings accounts to sock away money and to help banks keep appropriate cash reserves on hand.)
How to avoid them: Don’t treat your savings account like a checking account; keep transfers to a minimum. Set up automatic bill pay from your checking account, not from savings. If you know you’re going to need to transfer money from your savings account to a checking account, try to do it with one transaction, not several.
Paper statement fees
Some banks charge as much as $5 a month to mail you a hard copy of your bank statement, something most of us just glance at before we tear it up and toss it in the recycling bin.
How to avoid them: Go paperless, of course! Your past few years of statements are generally online, so you can always print one out via your bank’s website if you really need to. Just be aware that there can be a delay or slight cost in the event that you need to request older records.