How To Avoid These Common Bank Fees
Bank fees may be a part of doing business with the bank; however, you do not have to pay them. Yes, that’s right!
I once saw a definition of calories that made me laugh: tiny creatures that live in your closet and sew your clothes a little bit tighter every night. Bank fees are similar, only they make the holes in your budget a little bit larger every night.
This year, banks will collect more than 30 billion in overdraft fees.
That’s right! 30 Billion dollars?
The awesome part about bank fees, though, is you can choose not to pay them.
Here’s how I avoid each of these standard fees, with average costs based on my experience with several major banks.
5 Common Bank Fees And How To Avoid Them
1. Overdraft Fee:
Average Cost: $35
An overdraft fee is a very common, yet most avoidable fee. Overdraft fee accounts 64% of service charges on consumer deposits.
Let’s say you wrote a check for $100.50 to the cable company and when the cable company tried to cash the check, you only had $100.00. This means your check will bounce because you did not have enough money in your account to cover the transaction.
An overdraft fee is sometimes called an insufficient funds fee and your bank will charge you $35 (or whatever the overdraft fee is based on the bank’s fee schedule)
An overdraft fee is two-way meaning the payer and the payee gets charged.
The payee often passes that charge back to you. For example, the cable company will charge you not only a late fee, but their portion of the overdraft fee.
In the financial services industry, writing a check that bounces means you wrote a bad check because you didn’t have enough money in your account to cover the transaction.
How to Avoid It
When you set up a checking account, apply for overdraft protection. Some banks, like Bank of America and Chase, simply connect your savings account or credit card to your checking account.
Other banks use a separate line of credit attached to your checking account but keep in mind that this line of credit is a loan.
Having overdraft protection means the funds will automatically transfer money into your checking account if there isn’t enough to cover a check, withdrawal or purchase, at no charge.
This prevents your check from bouncing and saves you late fees and embarrassment. If your bank uses a line of credit, you’ll pay some interest, which is often just a few cents or dollars depending on how much money you used and how long it took you to pay back.
2. Domestic Wire Transfer Fee
A domestic wire is a transaction that occurs when you send money from one U.S bank to another. All banks do not operate in all states.
A domestic wire transfer fee that goes both ways: The sender is charged an outgoing wire transfer fee, while the receiver pays an incoming wire transfer fee.
Let’s say you live in New York and bank with Bank of America and your mother lives in Georgia and has an account with SunTrust bank.
There is no SunTrust bank in New York but you need to send money to her. This could be cause for a wire transfer but you can skip that. Here’s how.
How to Avoid It
Today, we have electronic services like Zelle, Cashapp, Paypal, Venmo, etc as alternatives for sending money to our friends and loved ones – at no charge.
Also, almost all banks offer bill payment services. Get the person or company’s information, add them to your payee list, and let the bank send the money for free. If timing is a strong factor, schedule early. Most bill payment systems only take one or two business days.
If you’re paying a company, you can sign up for autopay where the company electronically withdraws the money from your account or you can pay your bill directly on the company’s payment portal.
Another alternative is to go to a branch of the other party’s bank and deposit a check yourself.
3. Overdraft Transfer Fee
Not to be confused with an overdraft fee, an overdraft transfer fee occurs when you use your debit card without having enough funds to cover your debit purchase. Let’s say you use your debit card for $100 but only have $90 in your checking account, your bank will move your money for you — for a fee.
In an overdraft fee, you wrote a check to someone (individual or company) without having the funds in your account.
Why does this happen?
Overall, your checking account is a very important part of your banking experience. A checking account allows for unlimited transactions. When you authorize transactions, 99% of the time, the funds will be withdrawn from your checking account – unless you specify otherwise.
This means you are required to have the money in your checking account at all times.
The overdraft transfer fee is one way. Meaning you’re the only one who bears the cost. In an overdraft fee, the cost is two ways; you who wrote the check and the individual or company you wrote the check to will be charged the fee.
While an overdraft transfer fee costs less than an overdraft check fee, it is still an unnecessary fee that can be avoided.
How to Avoid It
Check your account daily online or on your smartphone and transfer your money yourself. To make it easier, set up alerts for when your checking account balance drops below a certain minimum.
4. Maintenance Fees and Other Miscellaneous Charges
Bank accounts can come with all sorts of extra fees — monthly maintenance charges, costs to order a checkbook, fees for bank checks and money orders, and stop check fees.
How to Avoid Them
Become a preferred customer of your bank. All banks have tiered banking relationships with every customer and the requirements vary by banks.
When I worked retail banking, we had different levels of membership with the highest level offering free personal checks and official checks, as well as exclusive tickets to games, Broadway shows, and many other benefits.
Most banks use your minimum combined account balance, including debt like mortgages or even credit cards, as a criterion for preferred customer status.
Most banks also want you to build a deeper relationship with them by having several products with them.
For instance, because I have a mortgage with my bank and a checking account and credit cards, I don’t pay for bank checks, money orders, checkbooks, and all the fees listed above.
If you’re also building up your emergency funds, that could make you eligible for being a preferred customer at your bank.
Set up an appointment with a bank representative to discuss your options.
5. ATM Fee
When you withdraw money from another bank’s ATM, you will be charged an ATM fee. That’s because you’re using an out-of-network ATM or what your bank considers a foreign. You’ll likely be charged fees both from that ATM and from your bank.
How to Avoid It
Know where to find your bank’s ATMs. For example, Long Islanders can use Citibank’s ATMs in all 7-Eleven stores, while Bank of America customers will find ATMs at every Long Island Railroad (LIRR) station.
If you’re not sure, most banking apps offer an ATM locator.
If your bank doesn’t have a nearby ATM, take advantage of cashback transactions at the grocery store. Most grocery stores allow you to get cashback of up to $50 dollars when you make a purchase.
Also, some banks refund the non-network ATM fees to compensate for their lack of locations or to make life easier for customers. Ask your bank if they offer this service.
Finally: Other Smart Ways to Avoid Bank Fees
Signing up for direct deposit can help you waive some fees, depending on your bank. Ask your bank representative about your options.
Check your accounts online daily to make sure you’re not close to overdrawing your account. If you use mobile banking, it only takes less than a minute.
Stop letting bank fees tear holes in your budget. How do you avoid bank fees? Share your tips in the comments.