Financial Education

8 bank fees explained (and how to avoid them)

Want to save money on your banking? Find out what the most common bank fees are and learn how to reduce or avoid them.

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Learn the facts about banking fees

Bank Fees
Learn how to avoid bank fees. Source: Adobe Stock

If you’re a bank customer, you’ve probably noticed all the different fees banks charge. But what are these fees, and why do banks charge them?

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This blog post will take a closer look at bank fees. We’ll also outline some ways to reduce or avoid them. So if you’re interested in learning more about bank fees, keep reading!

What are bank fees and why do banks charge them?

Bank fees can be expensive and time-consuming. Whether for a business or a personal bank account, understanding how your bank operates will help you make better decisions.

When you open an account, there are a lot of fees associated with it. Be it for account maintenance or an activity-based charge; they result from different activities.

Overall, bank fees are how banks make their profit and cover operating expenses. They contribute significantly to banks’ bottom lines.

However, before learning to reduce or avoid bank fees, you must understand the most common fees charged by banks. Keep reading to learn about them!

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8 most common fees charged by banks

Bank Fees
Bank fees explained. Source: Adobe Stock

The list of reasons why banks charge fees is long. But some bank fees are more likely to come up in your everyday life. 

Account Maintenance Fees

This account maintenance is one of the most common bank fees! Most banks charge a monthly fee to keep your money in checking or savings accounts simply.

It is a maintenance fee charged to your savings or checking account. Usually, the bank withdraws the fee amount automatically from it.

The Account Maintenance Fee can range from $5 to $25 per month. However, accounts with more features, such as rewards, may charge more.

Overdraft Fees

Banks will charge a protection fee if your account goes into a negative balance. It allows purchases to go through even if your budget doesn’t have enough funds.

It costs $30 to $35 each time you overdraw. So instead of being declined for a purchase, the bank covers the transaction.

This bank will cover the overdrafts by taking money from a second checking account, credit card, linked savings account, or a line of credit.

Insufficient Fund Fees

Also known as a returned-item fee, it is charged in case you have not opted for the overdraft program. So having insufficient funds when trying to make purchases may cost you.

When you make a transaction that costs more than the amount in your checking or savings account, your bank may decline the purchase or return it unpaid.

The fee for a failed transaction may cost $12 to $35 per transaction.

ATM Fees

ATMs are a convenient way to get cash, but they can also cost you. So, withdrawing money from an ATM not associated with your bank might charge a fee.

Each transaction can cost $4 to the ATM provider and $4 to your bank. As a result, you could end up paying as much as an $8 bank fee just for using an ATM.

Excess Transactions Fees

Most savings accounts hold a federal limit of six free monthly withdrawals and transfers. But when you exceed this limit, a transaction fee is charged.

The Excess Transaction fee may vary from $3 to $25 per transaction. But the cost of this kind of service may increase depending on how many transactions you make.

Wire Transfer Fees

Wire Transfers are a simple and quick way to send money from one bank account to another. This tool can be handy for transferring money to family, friends, or work.

Anyhow, this kind of transaction will cost you money. You can send money within the US or internationally, but sending money to another country can be more expensive.

The banks usually charge $20 or more for national transfers and $35 or more to send money abroad on a wire transfer.

Foreign Transaction Fee

Bank transactions outside the US can also cost money. Your bank may charge you a fee for using your debit card or using an ATM abroad.

Sometimes, if your card is issued by Mastercard or Visa, you will be charged 1% per transaction. Other card issuers can charge an extra percentage on top of that.

In the case of ATM transactions, they usually charge the normal percentage charged for out-of-network ATM fees. 

Account Closing Fees

Believe it or not, some banks may charge you a fee for closing your bank account too soon. You won’t always pay this kind of fee; it will depend on the process of each bank.

Typically, you need to keep your account open for 90 to 180 days before closing without paying a fee. It will depend on the bank’s system.

Account Closing Fees will cost you up to $25. So before closing your account, check out your bank’s rules for canceling it.

Tips for reducing your banking costs: how to avoid hidden fees

Bank Fees
Avoid hidden bank fees with these tips! Source: Adobe Stock

Now you know the 8 most common types of bank fees. However, there are still many different fees that can come up for banking services.

You can easily avoid some of these fees, but others can be difficult. First, you must shop around and be aware of account statements before choosing a bank to put your money in.

You can also avoid most of these bank fees with a few clicks. Research online bank accounts that are FDIC-insured. Online accounting is easier to record income and expenses.

Equally important, you can look for high-yield savings accounts. They offer higher than average interest rates. They have low fees, too!

If you are a wire-transfer heavy user, search for banks that offer free or discounts on this service. In addition, consider using P2P services like PayPal and Google Pay, for example.

Once you’ve chosen a bank, remember to stay on top of your accounts. Also, use your card prudently: limit your debit card fees by using your credit card.

To avoid overdraft or insufficient fund fees, sign up for notifications. You’ll be alerted by text or email when your balance is low. So it is easier to ensure that your funds will cover you.

In brief, there are many ways to cut down on bank fees, but opting for a bank that charges low fees overall may be the easiest one.

Remember to pay attention to the details so that you won’t be surprised by any hidden fees and save money.

Also, if you want to learn more about the financial world and how to keep track of all the related subjects, read our post below to learn all about how credit scores work!

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Do you know what a credit score is? What about your credit history? If you’re unsure, it is time to find out what these numbers represent in your life!

 

About the author  /  Beatriz Vieira

Beatriz Vieira is a producer and copywriter who is part of the finance writer team in this portal. She has a degree in Journalism and aims to improve her bilingual writing skills. Her subjects of most significant interest are culture, finances, and self-development.

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