Lower Your Expenses

How to Avoid Bank Fees: Stop Being Nickel and Dimed

Updated on November 1, 2019 Updated on November 1, 2019
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In the not so distant past, your banking options were pretty limited. Most people used a bank that was near their home or place of work. If you were lucky, you had a local credit union. This lack of choice meant you were subject to all the bank fees a bank could think up. And there were a lot of them.

Banks charge customers for everything from overdraft charges to ATM withdrawals and even the ridiculous paper statement fees. The average American spends $7 a month on bank fees. That might not sound like much, but why should you pay a bank for anything when they’re making plenty of money by loaning at your money to other customers for a pretty penny in interest?

Unless you carefully pour over your online or paper statement (for which you were likely charged a fee), you probably aren’t even aware of the bank fees you’re being charged or what some of the terms mean. What is a monthly maintenance fee? Do you need overdraft protection?

The good news is that as consumers, we have more choices than ever. The proliferation of online banks means we’re no longer beholden to the old guard banks like Chase, Bank of America, Citibank, and Wells Fargo.

More choice means more competition. Banks are pitching a little woo at consumers now offering all kinds of goodies, including almost no bank fees. Let’s see what nasty little fees banks are draining our wallets with and learn how to avoid bank fees.

Monthly Maintenance Fees

A monthly maintenance fee is also sometimes called a minimum balance requirement. It’s a fee charged if your account balance falls below a specific dollar amount. This fee can range from a few dollars up to $25 a month.

Screw This Fee

The simple answer is not to let your checking account fall below the minimum balance requirement, but that’s just not always possible, especially for the 78% of American workers who live paycheck to paycheck. Sometimes there just isn’t enough money to make it to the end of the month.

Often, banks will waive the monthly maintenance fee if you have your paycheck direct deposited into your checking account, make a certain number of transactions per month, set up a direct debit payment for monthly bill payments, or are a college student. 

Overdraft Fees

You can be subject to an overdraft fee when you spend more than you have available in your checking account either by writing a check or making a purchase or payment on your debit card, leaving your account with a negative balance.

This one hurts, the average overdraft fee is $33.26. 

Screw This Fee

There is really no excuse for over-drafting your bank account accidentally. Most banks offer online banking so you can check your available balance 24/7.

If you have a budget, you know how much money you have coming in and going out each month.

Even if you live paycheck to paycheck, scrape together a small cushion, so, at any given time, you have at least slightly more money in your checking account than your monthly bills require.

Many banks allow customers to sign up for various alerts, including a low balance alert. When your checking account dips below a certain level, you’ll get an alert so you can transfer funds from your savings account or at least not spend over that amount.

If your bank doesn’t offer these alerts, you can create a Trim account. Trim helps you save money on certain bills and will cancel unwanted subscription services. But it also provides low balance alerts.

 

Your bank may offer you the option to enroll in overdraft protection. If you have insufficient funds to cover a transaction, the bank will cover it for a fee, typically around $12.

When you choose to have overdraft protection, you’ll link an account like a savings account or credit card to your checking account. In the case of an overdraft, the money to cover it will come from the linked account.

If you choose not to enroll in overdraft protection, any transactions your account can’t cover will be denied. Should you opt-in? I don’t think so, here’s why.

When I first moved to NYC, I was broke. I used my debit card to pay for a $3.50 can of Cafe Bustelo (the world’s best coffee at a great price) but didn’t have the money in my account to cover it.

But I had overdraft protection, so the charge when through. This was years ago, so I forget the exact number, but that $3.50 can of Bustelo ended up costing me around $40. I’d rather have just had the transaction denied.

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ATM Withdrawal Fees

I rarely use cash because it’s hard to track. You take out $100 on Friday, and by Sunday, it’s gone, and you’re not even sure what you spent it on (drinks probably). But sometimes you need cash, so you hit up the ATM.

If the machine is an out of network ATM, the bank or company that operates it will charge you a fee, usually between $1 and $3.50. Your bank may also charge you a fee for using a machine outside its ATM network, usually $2 to $3.50. Double whammy!

Of all the bank fees out there, this is the one I feel most resentful about.

Screw This Fee

Yes, of course, if your bank charges you for using an out of network ATM, you can just go and find an ATM that is in-network. But sometimes that’s not convenient or possible. The easiest solution is to get cashback when you make debit card transactions in a place like a drug store or supermarket.

Some banks don’t charge ATM fees or reimburse you if you are charged. We’ll cover a few at the end of the article.

Wire Transfer Fee

I don’t think wire transfers are a big part of most people’s banking behavior, but you may face a situation where you need to get money somewhere fast.

And some people use a wire transfer to fund their brokerage accounts. Wire transfers can be an expensive way to move money around; some banks charge as much as $25 per transfer.

Screw This Fee

Wire transfers are kind of a dinosaur. With services like PayPal (which has an instant transfer option for a small fee), Zelle, and Venmo, most people don’t use wire transfers anymore.

Paper Statement Fees

If you want a hard copy of your banking transactions, your bank may charge a monthly service fee of $2 or $3 for the privilege.

Screw This Fee

To me, less paper is a good thing, and many people probably never even bother opening their bank statements, whether they’re paying for them or not.

But some people are old school and want that paper statement, and some people are really old school and don’t have nor want a computer, smartphone, or printer.

If that’s the case, you’ll have to specifically seek out a bank that doesn’t charge a paper statement fee.

Card Replacement Fee

Losing your debit card is such a hassle. Did you innocently lose or misplace it, or did someone swipe it, and at this very moment, are busy cleaning out your checking account?

Either way, you have to call the bank IMMEDIATELY and report it. The law is on your side when it comes to not being held responsible for unauthorized charges, but you must report the loss/theft quickly.  

If your credit, ATM, or debit card is lost or stolen, federal law limits your liability for unauthorized charges. Your protection against unauthorized charges depends on the type of card — and when you report the loss.

To add insult to injury, your bank may charge you a fee to replace the lost debit card.

Screw This Fee

Throw a polite fit. I’ve had a few experiences with lost debit and credit cards and hacked checking accounts and credit cards. It happens, no matter how good bank security is, the bad guys seem always to be a few steps ahead.

And in every case, the bank or credit card’s customer service was extremely helpful and accommodating.

need-help-paying-bills-credit-cards

If there is a charge, ask that it be waived. Explain that you’ve been a customer for X number of years, blah, blah, blah. If you need your card toot suite, ask that it be overnighted.

You’ll likely be charged a fee for this too. Try to talk your way out of it, but you might have less success getting this fee waived than you will getting the new card fee waived. Still worth a shot.

Inactivity Fees

I get excited when I find $5 in a coat pocket that I forgot about, so I can’t imagine having a whole bank account that I’ve forgotten about. It can happen though, maybe you had a checking account at a small, local bank in your college town, and when you graduated and moved away, you forgot about it.

Or maybe you’re so skeptical of banks even when they’re FDIC insured, that you prefer to have your money scattered around several different banks (seriously, there is no reason to do this) and forgot about or lost track of a few of them.

Whatever the reason, if a bank account has no activity for six to twelve months, some banks will charge a dormancy fee, which can range from $10 to $20 per month!

If you didn’t have a lot of money in a forgotten account and a dormancy fee kicks in, it won’t be long until the nonsufficient fund fees start adding up too!

Screw This Fee

Nearly all banks are Member FDIC banks. It’s not a requirement but makes it harder for non-member banks to attract customers. If you’re putting your money in multiple banks because you’re afraid it’s possible for an FDIC insured bank to go under and make you lose all of your money, fear not.

If that happens, not only has your bank gone under, the whole of the United States government is FUBAR, so you’ll have more significant problems.

The types of bank accounts insured by the FDIC include negotiable order of withdrawal (NOW), money market deposit account (MMDA), checking, savings, and certificate of deposit (CD) accounts. These accounts are insured for up to $250,000 per account.

If you have old accounts, just transfer the money out and close them. There’s no benefit to having multiple bank accounts unless you have more than $250,000 in any one account.

There’s an Easier Way

Gah! No one wants to read all the fine print to find out what monthly fees are lurking in their bank accounts.

Online banks put their brick and mortar counterparts in the shade when it comes not only to having far fewer fees, none in some cases, but they also typically offer better interest rates on checking and savings accounts.

We reviewed two online banks that won’t nickel and dime you to death, pay a decent interest rate, and meet all of your banking needs.

Aspiration Bank

Aspiration Bank is more than an online bank; it’s also a socially-conscious investing platform. This bank offers several financial products, including a cash management account with a 2% APY, no ATM fees worldwide, and fossil-fuel-free retirement and brokerage accounts.

The fee structure is a “pay what is fair” model with a sliding scale from 0% to 2%. If you decide to pay something, Aspiration Bank will take 10% of that amount and donate it to charity.

Aspiration Bank has a lot to recommend it. We did an in-depth review where you can learn all of the details.

Chime Bank

Chime Bank is a mobile banking app and debit card that has no minimum balance fee, monthly maintenance fees, or international transaction fees.

When you bank with Chime, you also have the option of getting access to your paycheck two days early, and when you sign up for direct deposit, 10% of your pay will be automatically transferred to your savings account.

This is great for those who struggle to save money. Paying yourself first is one of the most important pillars of personal finance, and Chime makes it easy.

Chime Bank has lots of cool perks and features. You can check out our full review for more.

It’s Your Money!

These days there are so many banks vying for your business that there is no reason to stick with a financial institution that is charging you fees for every little thing.

Banking is necessary; banks are not.

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Take your business and your money to a bank that appreciates its customers.

NOTE: We’d like to give a shout out to Grayson at DebtRoundUp.com for helping Matt out with my business bank fees.

Show Notes

Mint.com:  Mint will alert you to any strange fees.

Simple.com: A new online bank that promotes no bank fees.

Fidelity: The bank account that Andrew recommends. They reimburse ATM fees!

Candice Elliott - Editor-in-Chief Candice Elliott is a substantial contributor to Listen Money Matters. She has been a personal finance writer since 2013 and has written extensively on student loan debt, investing, and credit. She has successfully navigated these areas in her own life and knows how to help others do the same. Candice has answered thousands of questions from the LMM community and spent countless hours doing research for hundreds of personal finance articles. She happily calls New Orleans, Louisiana home-the most fun city in the world.
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