How to Avoid Bank Fees

According to the FDIC, in 2019 banks collected 11.45 billion dollars in overdraft and insufficient funds fees. No, that is not a typo. Collecting fees is one of the primary ways banks earn money. Unfortunately, that money is coming out of accountholders’ pockets. 

Depending on the infraction, each bank fee may only cost a handful of dollars, but these costs add up quickly over the month. What’s worse, they often continue stacking up – you may not realize you’ve overdrawn your account, resulting in accumulating fees for several transactions before you have a chance to fix the problem.

The best way to avoid these fees to understand what your bank may be penalizing you for. Here are several of the fees that are typically charged by banks and how to avoid them.

Overdraft fees

These are fees charged when you overdraw your account. Depending on your bank, they may handle these a few different ways. They might allow the charge to go through and allow your bank account to have a negative balance, but still charge you a fee for overdrawing your account. Another option is they reject the charge and also charge you a fee. 

The best way to avoid overdraft fees is to budget and track your expenses. Additionally, keep a cushion in your account so if you do accidentally spend more than you intend, you won’t overdraw your account. 

You can also check with your bank to see if they have a program that automatically transfers money from your savings account into your checking account if you overdraw. Usually this is free, but even if there is a fee involved it’s probably less expensive than an overdraft fee.

ATM Fees

ATM fees are charged when you withdraw cash from an ATM that is not owned by your bank. The operator of the ATM may charge you a fee, and your bank may charge you a fee as well. That means the $20 you withdrew could end up costing you $25 to $30 after the fees.

Usually, ATM fees can be avoided by taking the time to find an ATM owned by your bank or making sure you plan ahead and withdraw cash directly from the bank instead of using an ATM.

Minimum Balance Fees

Some bank accounts require you to maintain a minimum balance. If you fall below the minimum balance, they can charge you a fee. This fee may be charged on a monthly or even daily basis.

In order to avoid this fee, you’ll have to check with your bank to make sure what they require. If they do require a minimum balance, you have a few options. Make sure that balance is easy for you to maintain; if not, consider opening a different type of account that doesn’t require a minimum balance. Some banks will also waive these fees if you meet other certain requirements, such as having your paychecks direct-deposited into your account.

Monthly Service Fees

Some banks charge you a fee just for using their account. They may charge it regardless of how often you make deposits or withdrawals, or they may waive it so long as you meet specific requirements.

This is another situation where the only way to avoid the fee is to make sure you understand what your bank requires of you. Many free checking account options available. If there’s no way to avoid the service fee, then it might be time to set up an account with a new institution.

Transaction limit fees

Many banks will charge you for using a certain number of transactions each month. For example, they may limit you to 100 transactions and then charge you a small fee, such as $.10, for each additional transaction. 

Avoiding this can be tricky, as it’s challenging to keep track of how many individual transactions you’ve made each month. This is another situation where if you find that you’re consistently going over the transaction limit, it may be time to open a different account.

Bank fees can seemingly appear out of nowhere. Every type of account is different, and even within the same bank they probably offer several different checking accounts options with different rules. Overdraft fees and ATM fees are relatively easy to avoid, but the other fees will require some investigation on your part so you know exactly what your bank requires.

A few dollars here and a few dollars there may not seem like a lot of money. However, if you’re regularly paying fees to your bank, it might be time for a little bit of investigative work to see what you can do to avoid them. You work hard for your money, and you can avoid giving it to the bank by not being penalized with fees.