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Bank fees are pretty frustrating to deal with. They’re often unexpected and eat away at your hard-earned money.
More than one in four Americans with a checking account are paying fees, an average of $24 per month, or $288 per year. These fees may be holding you back from saving and reaching your financial goals.
Here are the most common bank fees you may encounter — and how to avoid them.
1. Overdraft fees
If you spend more money than you have in your account, your bank may charge an overdraft fee. For example, let’s say you have $350 in your account and spend $375.
If your bank approves the transaction, it will cover the difference and charge you a fee. The average overdraft fee is $26.61, based on Bankrate’s survey, though it varies by bank.
Some banks limit how many times they’ll cover overdrafts in a day or month. Even if your bank declines the transaction, it may charge you an nonsufficient funds (NSF) fee. The average NSF fee is $19.94, per Bankrate’s survey.
Overdraft fees are the lowest in decades, but 90% of bank accounts still have them.
To avoid overdraft fees:
- Set up account alerts: “Many banks offer text or email alerts for low balances, large transactions, and upcoming fees. These alerts can help you stay on top of your account activity and avoid overdrawing your account,” says Doug Carey, certified accountant and president of WealthTrace.
- Track expenses: Keep tabs on your upcoming costs, including everyday purchases and bill payments. It’s also important to watch your account for unauthorized transactions.
- Enroll in overdraft protection: This service allows you to link a savings or secondary checking account for a cost. If you exceed your available balance, your bank automatically initiates a transfer to cover the deficit. Overdraft protection can help you avoid overdraft fees.
2. ATM fees
These days, you can do more than just get cash out of an ATM, from depositing checks to transferring funds to paying bills. But in some cases, you may have to pay a fee.
If you use an ATM from a different bank or one not in your bank’s network, that bank may charge you for using its ATM. Your bank may also impose a fee for using an out-of-network ATM. This applies to ATMs both in the U.S. and abroad.
ATM fees are a record high — the average charge is $4.73. Fees can vary depending on the banks involved and the specific ATM used.
To avoid ATM fees:
- Use in-network ATMs: Steer clear of out-of-network ATMs. Many banks offer ATM locators on their website or mobile app to help you find an ATM that doesn’t charge a fee.
- Plan cash withdrawals: “If you can’t find an in-network ATM, plan to withdraw cash from your bank’s ATM or get cash back at the store when making purchases,” Carey says. You can also visit a physical branch and withdraw at the counter with a teller.
- Reimbursement programs: Some banks will reimburse you for fees incurred at out-of-network ATMs. Consider choosing a bank that offers this benefit.
3. Monthly maintenance fees
When you open a bank account, some banks may require a monthly maintenance fee to keep the account active. This fee covers services like account management, customer support, and online banking access.
The amount of the maintenance fee varies depending on your bank and the type of account you have. The average monthly service fee for non-interest accounts is $5.31.
To avoid monthly maintenance fees:
- Switch to a free account: Look for fee-free account options. They are often found at smaller local banks, credit unions, and online banks.
- Meet the minimum balance: Many banks waive the fees if you keep a minimum balance or make a specific number of monthly transactions. The average minimum balance requirement to have the fee waived is $469. Review the terms and conditions when opening a bank account to understand if there are any monthly maintenance fees.
- Enroll in direct deposit: “Many banks waive monthly maintenance fees if you have a regular direct deposit into your account. Set up direct deposit with your employer to qualify for this fee waiver.” says Carey.
4. Foreign transaction fees
Traveling abroad is exciting, but it’s not very thrilling to learn that international purchases often come at a cost.
When you use your debit or credit card for transactions outside your home country or with foreign currencies, your bank or credit card company may charge a foreign transaction fee. This fee covers the cost of converting currencies and processing international transactions.
Foreign transaction fees are charged as a percentage of the transaction amount, between 1%-3%, which means they can add up quickly if you make multiple purchases.
Avoid foreign transaction fees by choosing:
- The right bank: Some banks waive or reimburse foreign transaction fees if you use your debit card or withdraw overseas.
- The right card: “If you travel frequently or make international transactions, consider using a bank or credit card that offers no foreign transaction fees. Alternatively, you can explore dedicated travel credit cards,” says Carey.
- The right ATMs: There may be in-network ATMs at your destination if your bank partners with financial institutions abroad. Check with your bank before departure to confirm.
5. Minimum balance fees
Some banks require you to maintain a minimum balance when you open a bank account. If your balance falls below this minimum threshold, your bank may charge you a minimum balance fee.
This fee encourages customers to keep a certain amount of money in their account, but it’s frustrating to feel like you can’t access your money.
The minimum balance requirement and fee vary depending on the bank and your account type.
To avoid minimum balance fees:
- Maintain your balance: Ensure your account always stays above the minimum. Avoid making purchases or withdrawals that drop your available balance below the minimum.
- Set up account alerts: “Consider setting up alerts to notify you when your balance is getting close to the minimum threshold,” Carey adds.
- Switch accounts: If you cannot maintain the required balance, switch to an account with no minimum requirements.
The bottom line
Bank fees don’t have to put a dent in your wallet. Reviewing your accounts and being proactive can help protect your money and possibly cut bank fees altogether.
Don’t hesitate to negotiate with your bank. If you spot an unfair fee on your account, contact your bank’s customer service and request a refund. Many banks will waive the fee, especially if you’re a long-time customer with a good track record.
Opinions expressed are author’s alone, not those of any bank, credit card issuer, or other entity. This content has not been reviewed, approved, or otherwise endorsed by any of the entities included in the post.