Banks are notorious for having an extensive list of fees their customers can be charged and for not being particularly transparent about these fees. These fees are often buried in the footnotes of account agreements and have convoluted descriptions, and so most consumers are unaware of them or don’t fully understand how they work. This has the effect of hiding the true cost of banking services, which can end up being very expensive. In this article, we’ll go through 5 of the common bank fees that all consumers should be aware of and also share some tips on how to avoid paying these fees.
1. ATM Fees
Although most banks will advertise their vast network of fee-free ATMs, the reality is that most banks will charge $2.50-3.00 for each transaction that is made at an out of network ATM, and this includes non-withdrawal activities such as merely checking your account balance. In addition, if you need to withdraw cash outside of the U.S. not only will you be charged the $2.50-3.00 but you will also have to pay 3% of the withdrawal amount in foreign exchange fees. The best way to avoid these fees is to seek out checking accounts that have explicit ATM benefits, which usually come in the form of monthly rebates, or that charge no ATM fees at all. Taking advantage of the host of payment apps that are now available, which you can use not just to send money to other people but to make purchases, is another way of avoiding having to withdraw cash at ATMs and in the process incur ATM fees.
2. Wire Transfer Fee
Sending money is clearly an everyday banking activity and almost always both the sender and recipient are solving for speed, security and cost. Wire transfers are among the most secure and expedient ways to send money, particularly large sums, and so many vendors opt for this transfer method as a form of payment. However, wire transfer fees are among the most expensive fees that banks charge. Wire transfers typically cost $25-30 for domestic wires and $40-60 for international wire transfers. The best way to avoid these fees is to take advantage of payment services such as Zelle. The majority of large banks now offer Zelle and it is both fast and completely free.
3. Account Maintenance Fee
Not all bank accounts are free. In fact, when it comes to checking accounts, there is almost always going to be a catch for accounts that are advertised as being free. Consumers need to meet specific guidelines such as maintaining a certain account balance or setting up direct deposits of a certain size to avoid having to pay an account maintenance fee. This fee often sneaks up on consumers especially when they are drawn to open a checking account with an account bonus which frequently will include a few months with no account maintenance fees. Account maintenance fees can be anywhere from $5 to $50 per month, which over multiple years can add up to a lot. The best way to avoid paying account maintenance fees is to choose checking and savings accounts with very easy requirements that you can meet in any scenario.
4. Overdraft Fee
Of all the common bank fees, overdraft fees are by far the most pernicious. This is because overdraft fees are very easy to incur and if left unchecked can quickly add up to very large sums. While several banks have announced actions to curtail overdraft fees the reality is that the majority of banks in the United States still charge overdraft fees. There are three types of common overdraft fees. The first is the fee charged for overdrawing your account, which is typically $35 per item. The second fee is an overdraft transfer fee, which is a fee the bank will charge you for transferring money from a linked bank account (which is not overdrawn) to the overdrawn account. Overdraft transfer fees are typically $8-12 per transfer. The third type of overdraft fee is a continuous overdraft fee. This fee is typically charged if your account remains overdrawn for more than 5 business days. The continuous overdraft fee ranges from $25-35 per day. It is not uncommon for consumers to have overdrawn their accounts by just $10 and as a result, incurred hundreds of dollars of overdraft fees. The best way to avoid overdraft fees is to set up account alerts tied to your account balances and to develop a habit of monitoring your accounts at least once each week.
Read Also: How can you improve the Debt To Income (DTI) Ratio?
5. Stop Payment Fee
If you wrote a check or signed up for a recurring debit transaction and need to take action to prevent the check from being cleared or the debit from being processed, you will need to get a stop payment from your bank. The going rate for a stop payment is $30-35 per instance. This means that if you are trying to cancel a $100 check, you could end up paying 30-35% for the privilege of doing so. Unfortunately, one of the primary ways to avoid having to make stop payments is to get a bank account that waives these fees as part of their account offerings. However, the types of accounts that offer these have high minimum balance requirements or high account maintenance fees. Being organized about your finances and being proactive on your bill payments are steps that you can take to avoid needing to make a stop payment in the first place.
Start By Establishing Good Financial Habits
Not only are there many kinds of fees that you could get charged by banks, but they are often not well-disclosed and can be very costly. Avoiding these fees starts with ensuring that you are strategic when selecting your bank and bank account type. It is also a good idea to take advantage of free banking tools to set up account alerts so that you are as proactive as possible when issues arise.