Ultimate Guide to Understanding and Avoiding Common Bank Fees

Ultimate Guide to Understanding and Avoiding Common Bank Fees

Weekly Wealth Staff
Jan 09, 2023

Banking is essential to protect and manage your finances. However, not all banks offer free service—some fees can add up significantly if unchecked. Knowing different bank fees and how to avoid them can help save money.

Although some of these charges may be unavoidable, overdraft and non-sufficient fund (NSF) fees require careful management by account holders to avoid surprise costs down the line.

10 Bank Fees to Watch Out for and How to Avoid Them

Banking is a valuable asset to our day-to-day lives, and having access to it can be convenient when done correctly. With that said, many of us often don't realize the small fees we may incur in using bank services, costing people hundreds if not thousands of extra money until now!

With the necessary information, consumers can arm themselves against unnecessary banking expenses that come with direct deposits and mobile billing apps. Research different banks and their account types to ensure you know what costs are associated so you can make an informed decision each time you access your bank account.

Learn about the most common bank fees and discover ways to minimize or eliminate them!

1. Online Transfer Fees

Do you want to send money to someone without physically handing them your hard-earned cash? Wire transfers are a great way of transferring funds securely and quickly across the globe.

This method is becoming increasingly popular not only because of convenience but also to fewer chances of error compared to other payment systems like Venmo or personal checks!

Sending money to distant friends or family members can be challenging, especially with traditional wire transfer fees reaching up to $50. Fortunately, there are more cost-effective options for those who want to send funds across the country.

Ways to Cut Fees:

The digital revolution has made money transfer more efficient than ever before. Nowadays, PayPal and Zelle offer quick global transfers at a fraction of what wire services used to cost.

Make the money transfer to your friend or family member's account quicker and easier with a local branch. With an in-person transaction, you can deposit cash without being a customer.

2. Overdraft Fees

If you’ve ever experienced your checking account ending up in the red, you must be aware that banks charge exorbitant fees to cover the difference.

Unfortunately, even the most organized and prepared can find themselves in a difficult spot. Unanticipated charges or forgotten payments may lead to an overdraft, at which point your account could take quite a hit. Overdraft fees often range from $35 to $50 for each incident. Taking further action by attempting another transaction is not recommended, as this will likely result in multiple penalties.

Ways to Cut Fees:

Opting into overdraft protection is a crucial step for preserving your financial security. Consider speaking with your bank about using either savings or credit card funds as cover, allowing you to avoid any extra fees that come from transactions that would otherwise be considered an overdraft.

Additionally, declining all payments if the account runs out of money may present a challenge and put you at risk of additional charges; speak to a representative before taking such action.

3. Maintenance Fees

The most common type of banking fee is a monthly fee, which typically ranges from $4 to $25, depending on the account and other factors. No matter what kind of bank account you have, it will likely come with this cost.

A savings account usually has much lower monthly fees since it's not for using many different transactions like direct deposits or online bill payments. A savings account is ideally an avenue for you to put aside some extra money over time and let it accrue interest.

In contrast, a checking account is an essential part of daily life. Checking accounts make it simple to make payments and access cash. However, this convenience typically comes at the cost of monthly service fees, which can be more expensive than other banking products.

Ways to Cut Fees:

If you're looking to save on fees, some accounts waive the monthly cost if you keep up with a certain minimum balance. Additionally, many banks provide no-fees checking accounts — be sure to read the fine print as they may still charge individual fees for specific transactions.

4. Dormancy Fees

Gone inactive? Be aware of your bank's inactivity fees. If you don't log any transactions for a predetermined period, usually six months or one year, expect to incur up to $20 as an inactive account fee each month thereafter until the activity is resumed.

Ways to Cut Fees:

Don't let your inactive bank account become a burden. Consider transferring the balance into an investment such as a mutual fund or ETF and make better use of that money to potentially grow profits long-term rather than having it permanently diminish over time.

If you still wish to keep the account active, use it conservatively. You could also set up a direct payment for a streaming service or arrange an automatic transfer of $20 from your main bank account each payday. Automatic transfers ensure your account remains in good standing without any additional charges.

5. Credit Card Payment Protection and Foreign Transaction Fees

While these fees may not be conventional bank account charges, they are worth noting. Most credit cards offer balance protection: a minimal monthly rate based on the balance that gives you an insurance policy in case of unexpected circumstances.

If you can't continue making payments due to illness or sudden passing, this insurance will protect your loved ones from taking on the financial burden. Depending on plan details, it can freeze interest rates and payment plans paying off a significant portion of debt incurred during your lifetime.

Are you looking to purchase something from an international website? Be mindful of the foreign exchange fees your credit card company will likely charge for their currency conversion services. Although it may be convenient, this extra fee can add up if used regularly!

Ways to Cut Fees:

Credit insurance is not a necessary investment, but it can be beneficial. Canceling or opting out of this service requires making one phone call to your credit card provider. For those who frequently shop abroad, there are cards designed specifically for foreign purchases. These cards provide better exchange rates than Visa, MasterCard, and American Express offer.

6. Card Replacement Fees

Losing your banking cards is all too common, but one that comes with a price tag. Fees ranging between $5 and $30 to the added cost of expedited delivery replacing lost or damaged cards can be expensive.

Ways to Cut Fees:

Avoiding replacement card fees can be as simple as keeping your cards secure in a wallet or purse. If the dreaded event occurs where you've already misplaced them, there's still hope!

Some banks provide free replacements if you don't need it urgently, and asking for pity may be worth an attempt—you can try telling them about Fido eating up your belongings, and maybe they'll cancel out that fee too.

7. Account Closure Fees

It may come as a surprise, but some banks charge a fee to close an account if it's less than six months old. This fee is typically around $25 to $40. It's worth noting that this fee is unusual, as most people need a bank account for longer than just a few months. However, it's crucial to be aware of this potential charge in case you need to close your account within the first six months of opening it.

You may want to wait a few months before closing your account to save a handful of extra dollars. Since monthly service fees are lower than the early termination fee, keeping it open for now could be financially beneficial.

Ways to Cut Fees:

It's simple—don't close your account.

At times, it's best to consider whether you need the account in the first place. If you already have an account that serves a similar purpose, you may not need to open a new one. If you are planning to move, try to find a bank available in your new location to keep your account open.

8. ATM Withdrawal Fees

Although most banks don't impose a fee for accessing their ATMs, it's worth being aware of the potential costs that can come with third-party machines. In some cases, users may have to pay up to $4 just to withdraw a small amount, and your bank might add hidden costs!

Banks can be restrictive when it comes to ATM transactions. Often, you're only allowed up to 10 or 20 visits per month without incurring a fee with their ATMs! Going beyond this limit may come with unforeseen expenses.

Ways to Cut Fees:

Planning is always the best strategy for those looking to save on costly ATM fees. Whenever possible, make sure you visit your bank's ATM and steer clear of third-party ATMs at convenience stores or bars that often have the highest charges.

Contactless payments have become increasingly popular due to the pandemic, and many places now offer convenient options to pay using a debit or credit card.

9. Non-sufficient Fund (NSF) Fees

Non-sufficient funds (NSF) fees are similar to overdraft charges, but unlike them, your account will not go negative. These penalties range between $25 and $50 depending on the bank's terms of service and the type of accounts involved.

NSF fees usually kick in when a check bounces or an unsuccessful automated payment due to insufficient funds available.

Ways to Cut Fees:

Even if you slip up once, your bank may be willing to offer a helping hand. They could cut you some slack if you've been loyal for years. However, it's important not to let this become a habit.

Few banks and account types that won't charge for NSF situations to ensure you don't come across any unpleasant surprise fees. Far better is to be vigilant with money management so this doesn’t become an issue in the first place!

10. Printed Statement Fees

Forget about long waits for monthly statements or physically balancing your bank book. Nowadays, you can access all of this information anytime from anywhere quickly and easily with no extra cost to pay. So why spend an average of $3 per month on paper copies when everything is so convenient online?

Ways to Cut Fees:

Are you still stuck in the past? It's time to break out of that cycle! You can easily access all your banking records digitally with a quick login on a PC or smartphone. With this modern convenience, there’s no need to worry about paying for paper statements again.

If you're still receiving paper statements in the mail and paying a fee for them, your best bet is to call or visit your bank to ask them to stop delivering these documents. As not all online portals provide the option of opting out, physical contact with the institution may be necessary.

Start Smart Banking Today

Bank fees can add up quickly if you're not careful. But understanding which ones are most likely to hit your wallet will help you avoid them in the future. After all, knowledge is power when it comes to managing finances effectively!

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