Banks make billions each year in fees. That's no exaggeration. In 2017, the average ATM out-of-network fee hit a record $4.69 per transaction. And U.S. consumers paid an estimated $34.3 billion in overdraft fees.
While banks are businesses and businesses need to make money to survive, the fee situation is growing out of hand. There are fees for everything from slipping below a minimum amount in your bank to accounts being inactive.
In fact, Bank of America just announced recently that it has initiated a new $12 fee. Previously, customers who did all their banking online (“eBanking” customers, in the bank's parlance) paid no fees. Only those who went in to use a teller paid a fee. Last month, that changed — all eBanking accounts became Core Checking accounts, which come with a $12 monthly fee.
So let's break down the five most common fees you may find at any bank and ways to avoid them.
Three Tips for Avoiding Fees
Fees are everywhere in banks. I know that I've railed against them quite a bit here, but there are just so many! The best way to keep your money in your account and out of the bank's fee coffers is to follow these three points:
- Keep a cash cushion of at least $250 in all your accounts. This can be a tall order, but if you can do it, you'll avoid many common fees.
- Always read the fine print when opening accounts. It's tiny and it's written in legalese, but knowing what exactly you're signing on to is crucial. Knowledge is power!
- Stay alert. Banks can change their protocol at any time. They may raise or lower fees. They may introduce new ones. They may even eliminate them. Try to stay abreast of the information they send you. Always double check your accounts once a month to make sure there are no fees that are slipping by you.
Fees don't have to drain your account. If worst comes to worst, be ready to pull your account from the bank altogether. There's no need to stay at a bank that's more interested in taking money away from you than helping you manage your money.
Most Common Bank Fees
1. The Minimum Balance Fee
One of the most common bank fees out there is the minimum balance fee. It means exactly what it sounds like: You must keep a minimum balance in your account to avoid being charged.
This fee can be a recurring one for people who are paid at irregular intervals (such as freelancers or service workers).Capital One 360, don't charge this fee at all.
2. The Overdraft Fee
These are the fees that you incur when you overdraft your account, aka you try to take out more money than you have in your account.
Overdraft fees are bread-and-butter for banks. Every year, American banks are raking in fees worth more than $30 billion. This fee makes so much money for banks for a few reasons. First of all, people overdraft a lot. Second and more vicious, banks rank your overdrafts in order of highest to lowest and often end up charging you multiple times for overdrafting on the same day.
For example, say you have $100 in your checking account. On Tuesday, you spend $30 on gas, another $15 at Goodwill, and finally, $110 at the grocery store. The bank processes the $110 first, and you are now overdrafted. But banks often charge you for each overdraft. So rather than getting just one fee for overdrafting, you've now incurred three fees. Most banks charge $35 for overdraft fees, so you now owe $105 in fees, more than you originally had in your account.
Avoid this charge by avoiding overdrafts or by banking with an institution that doesn't charge overdraft fees.
Overdraft protection is a third option. This is a line of credit that the bank will extend to you (with a high-interest rate) up to a certain amount. That means the bank will cover expenses, up to a certain amount, after your account hits $0.
Not all banks charge this fee — we like Chime because it doesn't!
3. The ATM Fee
There are few things that get my blood boiling like an ATM fee. It's a fee that banks charge to get at my own money! You're telling me that once I put my money in your bank, you're going to charge me to take it out? That's robbery.
And there are some banks that reimburse you for ATM fees. Check out banking with Ally if you're interested in that.
4. Maintenance Fees
“Maintenance” brings to mind someone fixing your ceiling or unclogging your garbage disposal. That's not what it means to banks. Maintenance fees are fees you pay simply for having an open account with a bank, and usually, it's a monthly charge.
On the other hand, Betterment Checking doesn't charge any maintenance fees or overdraft fees. It's one of our top recommended online banks for its ease of use and low-fee structure.
5. The Hard Copy Fee
If you can't or don't want to go paperless, you may be charged for it. Many banks charge their customers for mailed statements. The fee is waived for people who elect to receive statements via email, but when 23% of urban Americans and 28% of rural Americans don't have internet access, sometimes going paperless isn't an option.
Barclays is awesome at not charging fees, including a hard copy fee.