Common bank fees and how to avoid them
Few things are as frustrating as bank fees. Bank fees are a relatively common pain point for most Americans. Monthly maintenance fees can be problematic, with MoneyRates finding that the average charge is $13.95 per month—this represents the average fee for monthly account maintenance. All totaled, reports indicate that the average American is hit with $300 in bank fees annually. The most common bank fees contributing to this total include charges for ATM use, overdrafts, and account maintenance. These fees affect a wide range of bank accounts, including checking and savings accounts. Thankfully, there are ways to minimize these fees, but ignoring these tips can needlessly erode your finances. If you want to reclaim your hard-earned money, this guide can help you save hundreds of dollars annually.
Understanding common bank fees
Banks charge various fees, some of which are easy to avoid, while others are more challenging to dodge, such as wire transfer fees. Here are seven common banking fees and potential ways to avoid them.
Monthly maintenance fees
Maintenance fees are typically the most onerous of bank fees, often referred to as a service fee or monthly fee. Credit unions and banks charge this fee, arguably, to service your account, and the amount is commonly automatically withdrawn from your account each statement cycle.
A MoneyRates survey found that the average monthly maintenance fee is $13.95, or $167.40 annually. Banks require account holders to pay these monthly service fees to help cover operating costs and other operating costs.
How to avoid monthly maintenance fees: Fortunately, there are usually some options to sidestep this fee. Many, though not all, financial institutions will waive this fee if you establish a recurring direct deposit or meet a minimum balance requirement. Some banks may also waive or reduce fees on certain account types. Be aware that some savings accounts may incur this fee; therefore, inquire about the possibility of eliminating it by maintaining multiple accounts.
Overdraft fees
Overdraft fees are particularly frustrating and occur when you exceed the available amount in your account for a transaction. This can result in a negative balance, and so the bank temporarily covers the deficit and charges you a fee in return. The MoneyRates survey found the average overdraft fee is roughly $31 per occurrence.
Worse yet, some institutions may authorize multiple transactions, creating multiple fee opportunities. Americans paid over $5.8 billion in overdraft fees in 2023, according to the Consumer Financial Protection Bureau.
How to avoid the fee: Diligently monitoring your spending and account balance is a good way to avoid overdraft fees. Always make sure you have enough money in your account before making transactions. More practically, most institutions allow customers to link a savings account to their checking account, enabling them to transfer funds to prevent overdrafts. Be aware of this, though, as too many transfers in a month may create an excessive transaction fee.
ATM fees and out-of-network charges
It’s common for banks and credit unions to charge you for using an ATM outside their network. This occurs when withdrawing cash from an ATM not tied to your bank or when accessing an ATM in another country. In the case of the latter, the bank may charge a percentage of the amount withdrawn as a fee.
The MoneyRates survey found that the average ATM fee is $4.55 for using an out-of-network ATM. It’s wise to avoid double charges, which occur when you use an out-of-network ATM and the given ATM operator also charges a fee.
How to avoid ATM fees: It’s typically best to use an ATM within your bank’s network to evade this fee, as using ATMs outside your bank’s network can result in additional charges. Banks often include an ATM locator on their website and in their apps to help you find in-network machines near you. Additionally, some banks reimburse for a specific number of monthly ATM fees. If you regularly use an ATM, it may be prudent to select one that offers fee-free withdrawals.
Inactivity fees
Otherwise known as dormant fees, banks charge fees for inactivity in an account. Fees vary by institution, but they can reach up to $15 or $20. There’s no industry standard for when the fee occurs, but it’s common to see the fee after six to 12 months of inactivity.
How to avoid the fee: Making a minimum number of transactions each month, such as using your debit card for several small purchases, is a good way to avoid this fee. Activating auto pay or using direct deposit are other effective ways to prevent the fee. You may have too many accounts, so consider consolidating them to save money.
Wire transfer fees
Wire transfers are a helpful tool to transfer funds electronically, nearly immediately. However, there is processing work to do the transfer, resulting in a fee for banking customers.
The average wire transfer fee is $27 for domestic and $44 for international outbound wires, according to Yahoo Finance. International transfers usually have higher fees than domestic ones, making them a more expensive option for sending money abroad. Moreover, it’s not uncommon for institutions to charge fees for inbound wires.
How to avoid wire transfer fees: Using wire transfers judiciously is the best way to avoid the fee. While a secure way to send money, it’s not cheap. Some account types may offer reduced fees, but this varies by bank.
Check ordering fees
Upon opening a new checking account, institutions typically give you a small number of paper checks to use. This is helpful and free, but it’s not common for banks or credit unions to give you more without a cost.
These fees vary by bank, but it’s fair to expect to pay $25 or $30 for ordering checks.
How to avoid the fee: Some banks may offer reduced costs or even free checks for certain account types or by maintaining a minimum account balance. If your account does not qualify for free checks, consider ordering checks from a third party, as they’re usually cheaper.
Ancillary fees
Fees are substantial money makers for banks. You may encounter a wide range of potential fees, depending on the institution, your account type, and the service being performed.
Secondary fees include stop payment fees, account research charges, cashier’s checks/money orders, returned items fees, early account closure fees, paper statement fees, and more, and can easily drain money from your account if you’re not careful.
How to avoid the fee: Banks don’t always clearly communicate the various fees they charge, but every institution must maintain a detailed list of fees. Ask to see the fee schedule or truth-in-savings disclosure to identify potential fees. To avoid fees associated with paper statements, opt for online statements instead, as many banks charge extra for receiving paper statements.
Strategies to avoid bank charges
Banking fees can easily erode your resources, particularly if you’re not careful about your account activity. Thankfully, there are often some simple solutions you can employ to avoid many charges. These strategies can help you waive fees and save money.
Establish direct deposit
Using direct deposit is one of the most effective ways to avoid bank charges, particularly monthly maintenance fees. Financial institutions typically prefer direct deposit because it increases the likelihood of customers keeping their accounts and may lead to more regular account activity. As a result, the bank or credit union may waive the monthly maintenance fee as a reward.
Direct deposit is beneficial for consumers as well. It’s convenient, secure, and can make budgeting easier. The potential savings are a nice perk that keeps the bank from raiding your wallet.
Wisely use ATMs
With the average out-of-network ATM fee being roughly $5 per transaction, it’s easy to let this fee get out of control. Worse yet, if you use ATMs that have their own respective fees, you can end up paying even more.
Using in-network ATMs and reducing the frequency of transactions is the simplest way to avoid or reduce this fee. Some banks and credit unions refund out-of-network ATM fees, often up to a specific monthly amount. If you regularly withdraw funds from an ATM, identify a financial institution that waives the fee to minimize needless expenses and keep more money in your account.
Set up account alerts
Do you occasionally incur overdraft or insufficient funds fees? Creating account alerts for your banking needs can be a good way to eliminate this fee. You can accomplish this by using your bank or credit union app.
Depending on the institution, you can request the app to notify you of due dates, balances, large withdrawals, and more. This can equip you with the information necessary to help avoid incurring nasty fees, especially by monitoring your account activity during each statement cycle to ensure you meet any requirements for fee waivers.
Wisely take advantage of account bundling
Credit unions and banks know that the more accounts you have with them, the stickier you are as a customer. They don’t want to lose you as a customer and may offer certain perks to incentivize you to stay with their institution.
A leading way banks do this is by eliminating certain fees if you bundle accounts. For example, if you have checking or savings accounts, a loan through the bank, or a credit card, they may waive monthly maintenance fees. Consider asking the bank or credit union if you don’t see this feature.
Consider an alternative banking solution
The local brick-and-mortar bank isn’t the only institution to consider for your needs. Those traditional institutions have higher overhead costs and typically charge more fees to their clients.
An online bank is a good alternative for people who don’t need the full banking experience. They commonly offer the same FDIC coverage, charge fewer fees, provide cheaper ATM access, and often pay higher interest rates through their high-yield savings accounts.
If you want a local institution, consider a credit union. They can be a good middle ground, fee-wise, between a traditional and an online bank. When choosing a banking solution, it’s important to consider your accounting and financial planning needs to ensure the services align with your broader financial goals.
Frequently asked questions
Where you bank matters, especially in terms of fees. These are common questions readers have about bank fees.
How can I avoid overdraft fees completely?
Avoiding overdraft fees can be simple with some due diligence. Leaving a small cushion in your checking account and creating low-balance alerts are effective tools. Instead of using overdraft protection, link your checking account to a linked savings account to avoid fees.
What are the typical requirements to waive monthly transaction fees?
Banks vary on what they expect to waive monthly transaction fees. Common requirements include establishing direct deposit, meeting minimum balance requirements, maintaining the minimum balance required, or posting multiple monthly transactions.
Can I negotiate bank fees with my institution?
Yes, it’s possible to negotiate bank fees with many institutions. If you’re a long-term customer, ask the manager what they can do to eliminate or reduce fees, and see if you can have a fee waived.
What is an excessive transaction fee?
An excessive transaction fee is when your institution charges you for too many withdrawals or transfers out of a savings or money market account. Until 2020, Regulation D limited these to six per month, but many banks still charge some kind of fee for this occurrence. It’s fair to expect the fee to be up to $15 with most banks, and in some cases, an excessive transaction may also result in a service fee depending on the bank’s policies.
How to avoid bank fees: Bottom line
Bank fees can frustratingly take funds out of your pocket. While some charges are unavoidable, you can get around many others with minimal effort. Don’t be shy about asking to see the bank’s fee schedule or truth-in-savings disclosure to identify potential fees. Fees such as monthly maintenance fees, international transaction fees, and foreign transaction fees can add up quickly, so it’s important to regularly review your bank account and checking accounts for these charges. If the institution is too fee-happy, consider an alternative solution to avoid losing hundreds of dollars annually.
