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14 Banking Fees That Really Add Up
There is nothing worse than watching your bank account dip. One moment you have a healthy balance. The next your account is hit with multiple deductions. But where is your money going?
Well, there’s one culprit you might not have considered: bank fees.
Financial institutions charge fees that can be costly and confusing. For instance: receiving paper bank statements. You might get charged for those — unless you opt out. Sneaky, right?
Here are 14 of the most common bank fees and their typical costs.
No. 1: Overdraft coverage fees
What it is: An overdraft fee occurs when you opt-in to overdraft coverage and then overdraw your account. When a financial institution covers a purchase due to insufficient funds, you’ll be penalized. For instance, if you charge $50, but only have $5 in your account, you will owe the difference of $45 to your bank. And you’ll be hit with an overdraft fee, typically around $35 — meaning you’ll owe $80 in total. Alternatively, a financial institution won’t clear a transaction if you opt-out of overdraft coverage. But be careful — you might still receive a different type of fee for the attempt.
How to avoid it: You can opt-out of overdraft coverage. The Federal Reserve System requires financial institutions to receive permission to provide overdraft coverage. If you opt-in for overdraft coverage, ensure that you have the necessary funds available before attempting a charge. Sign up for account balance notifications to receive an email or text alert when your account falls below a certain amount.
No. 2: Extended overdraft fees
What it is: Unintentionally receiving an overdraft fee is bad. But an extended fee until you bring your account balance up is even worse. Some banks charge an extended overdraft fee if an account is overdrawn for more than five consecutive business days. For each week the account remains overdrawn, you’ll receive an additional fee — about $25 with a limit of four fees up to $100 total.
Cost: $25 per week up to $100
How to avoid it: Opt out of overdraft coverage. Otherwise, don’t overcharge your account. If you’re hit with an overdraft fee, make sure to deposit money right away to bring your account balance back to good standing.
No. 3: Overdraft protection
What it is: Overdraft protection is an opt-in service that prevents an overdraft fee. There’s no cost to enroll, but you’ll receive a charge if you use the service. And it’s significantly lower than an overdraft fee. Overdraft protection links a secondary source to your account. For instance, you might designate that an overdrawn checking account will transfer funds from a savings account. This ensures you have enough money to cover charges — avoiding costly overdraft fees.
Cost: $3 - $12
How to avoid it: Opt-out of overdraft coverage and overdraft protection. Don’t overdraw your bank account and you’ll avoid overdraft fees, extended fees, and overdraft protection fees entirely.
No. 4: Bank teller fees
What it is: As more banks transfer to a digital platform, physical branches are limiting unnecessary in-person transactions. Thus, a bank teller fee is basically the cost to talk to a live person. Before you head to your bank, make sure to ask if there is a fee associated with speaking to a teller for your transaction. For instance, a bank may charge for an in-person account transfer — encouraging you to do it online. If you prefer the convenience of an in-person interaction, be prepared to pay for it.
Cost: $3 - $8
How to avoid it: Call your financial institution to learn which transactions qualify for a bank teller fee. Chances are you can manage on your own online or through a mobile app just as easily — and without the cost.
No. 5: Minimum balance fees
What it is: Did you know that financial institutions expect you to keep your account well funded? A minimum balance requirement determines how much money you need to maintain an account. Typically the minimum ranges from $25 to a few hundred dollars. If your account slips even $1 below the minimum you’ll receive a monthly fee. Deposit enough money to bring your account over the limit and back to good standing.
How to avoid it: Know how much money your bank requires to maintain each of your accounts. If you have trouble meeting the minimum balance requirements, then explore other financial options, such as a free checking or savings account.
No. 6: ATM fees
What it is: An automated teller machine (ATM) is an electronic banking outpost that allows customers to complete financial transactions without visiting a branch location. Financial institutions charge ATM fees for machines that aren’t affiliated with their network. If you use a machine that isn’t associated with your bank’s preferred network, you’ll end up paying a few extra dollars for each withdrawal. Not to mention the fee charged by the ATM owner, which is often a separate fee.
Cost: $1 - $3
How to avoid it: Don’t pay to withdraw your own money. Find a financial institution that offers free ATM service. And only frequent in-network ATMs. It also never hurts to carry extra cash. This way you’ll avoid relying on out-of-network ATMs in a pinch.
No. 7: Paper statement fees
What it is: A paper statement fee is the cost associated with receiving a paper account statement by mail. Many banks are transitioning to a fully digital platform and prefer if their customers opt for electronic statements. Go ahead and make the switch. It will save you money and reduce your carbon footprint.
Cost: $2 - $3
How to avoid it: Opt out of paper statements by notifying your financial institution online, over the phone, or in-person.
No. 8: Wire transfer fees
What it is: Some financial institutions charge a fee for wire transfer, which is an electronic payment across a network — domestically or internationally. A wire transfer is a convenient method of payment, but it comes at a cost. Domestic wire transfer fees hover around $20. But financial institutions may charge upwards of $40 for each international wire.
Cost: $20 - $25
How to avoid it: Wire transfers aren’t the only way to send money so consider a cheaper alternative. For instance, nonbank providers might charge lower fees. And for international transfers, search for the most favorable exchange rates. Business accounts tend to charge a lower fee for wire transfers or charge nothing at all.
No. 9: Annual fees
What it is: Financial institutions often charge a yearly fee to its credit card holders of premier cards. An annual fee is a tradeoff for money-saving benefits — such as travel points and other rewards. If you have a credit card with an annual fee, make sure to take full advantage of the card’s perks. Otherwise it’s not worth it.
Cost: $35 - $100
How to avoid it: Avoid signing up for a credit card that charges an annual fee. There are plenty of free credit card options available.
No. 10: Safe deposit box fees
What it is: A safe deposit box offers protection for priceless valuables and important documents. The container lives safely inside a bank’s high-security vault while remaining accessible to its owner. The main benefit is the bank’s high-security system. But that peace of mind will cost you.
How to avoid: The cost of a safe deposit box varies based on size, location, and storage length. Ask yourself if you really need one before paying the monthly fee.
No. 11: Chargeback fee
What it is: A charge-back fee occurs when a customer disputes a charge. The customer typically asks the financial institution to nullify the charge and return the funds to the customer’s account. Charge-backs are intended to protect consumers in cases of fraud.
Here are two examples of when a charge-back fee might apply:
- A merchant may receive a charge-back fee if a customer disputes the charge of their product or service.
- An account holder might receive a charge-back fee for a failed payment, such as a check deposited by another person — also called a return deposit fee.
In both cases, the financial institution reverses the payment and charges a fee.
Cost: $20 - $50
How to avoid it: You can contest a charge-back fee. Contact your financial institution to do so.
No. 12: Account closure fees
What it is: An early account closure fee only affects customers who close their bank account too quickly. Typically, a new bank account must remain open for 90 to 180 days. After this period, you may close an account without penalty. The fee is intended to penalize customers signing up for a new bank account solely to take advantage of new customer bonuses.
How to avoid it: Keep your account open beyond the minimum length required — whether that’s 90 or 180 days. Check with your financial institution for more information.
No. 13: Inactivity fees
What it is: If you don’t interact with your financial institution for a certain amount of time, you may receive an inactivity fee. Typically, a customer must interact with their financial institution in some capacity within a few years to remain active. A company will close an inactive account, charge a fee, and then transfer the remaining assets to the state.
How to avoid it: Don’t let your accounts fall into inactive status. Keep them up-to-date by logging in regularly and making transactions.
No. 14: Card replacement fees
What it is: If your debit or credit card goes missing then you may have to pay a fee to replace it. Some financial institutions offer a free replacement while others charge for the card and shipping. For instance, Bank of America charges $5 for each replacement card and $15 for a rush replacement if you need the new card ASAP.
Cost: $5 - $25
How to avoid it: The only way to avoid this fee is to safeguard your card. If you lose or have a card stolen, you’re out of luck.
Bank fees can cost you. But if you know what to watch for and spend responsibly, you can take steps to avoid them.