Types of Bank Fees and How to Avoid Them

Types of Bank Fees and How to Avoid Them

Introduction

The bank may charge account holders for services provided by the bank or as a penalty for specific actions.

Bank fees can result from different activities. The bank performs a particular service on behalf of the customer, or a penalty charge is incurred.

Why Do Banks Charge Fees

Banks charge fees for various reasons, and the fees charged by banks are generally one of their primary sources of revenue. The number of people who pay bank fees contributes significantly to the bank’s bottom line, even if some manage to avoid fees from their bank.

The reasons for fees are varied, but a few are very common and that customers are more likely to encounter.

To cover operating expenses and generate profits, most banks charge a fee for their services. When banks lend you money, they charge interest. As well as opening an account, you are required to pay fees. The report may even charge fees if it does not charge any.

Understanding all of your bank charges fees is key to reducing or eliminating as many as possible. Here is a guide to fees your bank charges.

Bank Fee Schedule

Transparency about bank fees is a requirement for all financial institutions. There is a detailed disclosure of the fee schedule on the bank websites and in fine pamphlet print, and it is essential to read and understand the exposures. In addition to the competition, Government agencies like the Consumer Financial Protection Bureau are also subject to competition Complaints, and concerns about fees from the public are taken seriously by the Consumer Financial Protection Bureau (CFPB) and the Office of the Comptroller of the Currency (OCC).

Types of Bank Fees

  • Customers of some banks are required to maintain a minimum balance each month. The customer will be charged a fee if the balance falls below this requirement for even a day.
  • Many accounts allow customers to withdraw and transfer funds at least once per month. However, additional withdrawals may incur a fee. The first six withdrawals from a savings account are free; withdrawals will be charged after that. Additional charges apply to wire transfers.
  • Customers may be charged ATM fees if they withdraw too much cash from ATMs or use machines outside their banks’ networks. These fees are usually taken when the transaction is completed rather than at the end of the month.
  • If the customer does not have enough money to cover the total amount, the bank reverses the transaction. An NSF fee is assessed.
  • Overdraft fees are charged whenever the balance drops below zero. Since banks consider overdrafts short-term loans, it’s not uncommon for them to charge interest.
  • Due to late payment fees, cardholders are charged if they fail to pay by the due date listed on their statements.

 Insufficient Funds Fee (Overdraft Fee)

If your checking account does not contain enough funds to cover the entire transaction, you can be charged an insufficient funds fee. Non-sufficient funds fees or NSF fees are sometimes referred to as insufficient funds fees. Due to this, the credit union denies the transaction and collects the payment.

Suppose you want Chase to refund your overdraft fees; there are several ways. We will tell you how to put the money you would’ve been paying back into your pocket.

 Account Maintenance Service Fees

Maintaining a checking or savings account is a common and straightforward fee banks charge. On average, banks charge about $14.13 per month for account maintenance, and an account with a bank costs $169.56 a year on average.

ATM Fee

Generally, you can use an automated teller machine (ATM) free at most banks. If you use one not connected to your bank, you may be charged at least $4.

Using an ATM outside your bank’s network may also incur a fee from your bank. Certain accounts offer a monthly limit on ATM fees, or they refund all ATM fees.

Minimum Balance Fee

Many banks reduce or eliminate the monthly maintenance fee if you maintain a minimum balance in your account. Generally, a minimum balance of $500 to $1,000 is required.

You must pay the maintenance fee if your account falls below the minimum. You get nothing in return for letting the bank use your money to make money.

Inactivity Fee

Even though it may seem strange, inactivity fees can also result from not using your savings or checking account. All banks do not charge this fee and most charge about $10. A large majority of the time, it kicks in after an inactivity of about six months.

Excess Activity Fee

Suppose you transfer or withdraw money from your savings account or money market account too often. In that case, your financial institution will charge you an excess activity fee – also known as a savings withdrawal fee, withdrawal limit fee, excessive withdrawal fee, or some other variation. Transfers and withdrawals are typically allowed by institutions 3–6 times per month.

Once you’ve used up those chances, your bank may still allow you to move money around, but with a fee each time.

Typically, financial institutions charge $5 to $15 per transaction over the limit per month, but it varies by institution.

Paper Statement Fee

Financial institutions, particularly banks, have a long tradition of producing paper statements.

You’ll receive personal account statements on odd days in monthly increments.

It is possible, for instance, that your “month” ends on the 21st rather than at the end of the month.

Typically, monthly statements for business accounts are issued at the beginning of the calendar month. You’ll receive 12 messages per year if you have a personal or a business account.

The purpose of bank statements is multifaceted.

Lost Card Fee

The majority of big banks will not charge you for replacing a regular debit card. A rush replacement, however, will incur a fee.

As each bank handles requests differently, the delivery time for replacement cards can vary greatly. Because regular replacements are sent via standard mail, the time may vary based on the location.

Therefore, it could take anywhere from 3 to 15 business days for these cards to arrive. You may not be able to wait 15 business days if your replacement is not needed right away.

Wire Transfer Fee

For incoming and outgoing wire transfers, banks typically charge a fee. The fee can range from $0 to more than $40.

Wire transfers within the U.S. can be expensive, with typical outgoing fees of $25 per transfer. However, if you need a transfer to happen quickly, it may be a good option if you need to transfer a lot of money.

 Foreign Transaction Fee

Consumers who use an electronic payment card to purchase in a foreign currency are charged a foreign transaction fee by their financial institution. These fees can apply to purchases made with your credit card in foreign countries when traveling. Still, they can also apply to purchases made online when the seller is foreign and processes the transaction in the local currency.

Fees for a foreign transaction may also be “foreign purchase fees” or “foreign currency fees.”

Returned Deposit Fee

If a consumer bounces a payment, a financial institution or another creditor charges a returned payment fee.

In insufficient funds, your account may be closed or frozen, resulting in returned payments. Checks and other forms of compensation are discouraged from being submitted by customers who know their reviews will not be clear.

Fees for returned payments, or dishonored costs, are charged when a customer makes a payment with insufficient funds to cover the expense.

Returning payments can result in fees ranging anywhere between $25 and $40 depending on the creditor. Insufficient funds in a consumer’s account or closed accounts may cause payments to be returned, as noted above. Payments can also be returned due to a charge being frozen for legitimate reasons, such as suspicious activity or government garnishment.

Returned payment fees are usually associated with checks, but they can also occur with online payments or scheduled to be taken automatically. Reviewing or automating payments should not be used. If customers know they will not have enough money to cover the cost by the due date, they shouldn’t send a check.

Early Account Closing Fee

If you close your account too soon, it will be closed. Before closing your account without a fee, you need to keep it open for a certain period (usually 90 to 180 days). Make sure you understand the bank’s closing policies before closing your account.

How to Avoid Fees

It is good to compare bank accounts before deciding to put your money in one. Despite the physical branch locations that brick-and-mortar banks (such as Bank of America, Wells Fargo, Chase Bank) offer, they charge high fees for their services.

Research online banks that are FDIC-insured to avoid the majority of these fees. You should seek high-interest savings accounts that offer low prices and higher rates than average when it comes to saving.

 Look for Accounts With No Fees

No-fee savings accounts do not charge monthly maintenance fees and offer valuable features that help customers manage and maximize their savings. They usually provide highly-rated mobile apps and excellent customer service. Banks often emphasize that they have no fees by pointing out that they do not charge monthly maintenance fees and charge low prices for transactions such as wire transfers, excessive withdrawals, and other services.

Make Payments One Time

It is best to make payments one time rather than making payments again and again as there is less risk of losing details.

Apply for No Foreign Transaction Fee Cards

As a benefit, many credit cards waive foreign transaction fees, and most of these are travel credit cards. Co-branded airline and hotel cards do not charge foreign transaction fees, as premium (high-annual-fee) travel rewards credit cards.

Related:Best Military Banks and Credit Unions for Veterans & Active Military

Foreign transaction and annual fees are not associated with the Capital One VentureOne Rewards Credit Card.

Top credit cards with no foreign transaction fee

Recommended card Earning rate Annual fee
Chase Sapphire Preferred® Card 5x on travel purchased through Chase Ultimate Rewards®, 3x on dining and 2x on all other travel purchases $95
Capital One Venture Rewards Credit Card 2 Miles per dollar on every purchase, every day $95
Capital One VentureOne Rewards Credit Card 1.25 Miles per dollar on every purchase, every day $0

The table in the next section highlights many other cards without FX fees and our top picks. Find out about the best credit cards for international travel that do not charge foreign transaction fees.

Have Accounts at One Bank

The ideal number of bank accounts is one. You have better control over and management of your account; you don’t need to maintain a minimum balance in the report, you can use your finds efficiently, etc. You must consider all aspects carefully if your needs indicate the need for more than one account.

Maintain Minimum Balance Requirements

To avoid paying a monthly fee, you usually have to maintain a minimum balance in your bank account.

If your bank account has a $100 minimum balance requirement, you should ensure your balance does not fall below $99.99.

Maintaining a minimum balance will allow you to avoid the fee. Should you fall below the minimum, a fee will be assessed.

These fees are typically charged by brick and mortar banks for various deposit accounts.

One of the benefits of online banks is that they have lower fees, so there is usually no minimum balance requirement. However, some investment accounts also have a minimum balance requirement.

It’s essential to know the minimum balance requirement for the account you’re considering opening.

You don’t want to do these things:

Imagine opening a new bank account, only to discover that there is a monthly fee.

Don’t Have Overdraft Protection

In the absence of overdraft protection, if there isn’t enough money in your account to cover the debt, your bank can charge a non-sufficient funds (NSF) fee, which is comparable to an overdraft fee. You may also be reported to ChexSystems if the party receiving the lousy check demands reimbursement for the returned check fee. ChexSystems acts as a credit report for your bank history.

According to a study by NerdWallet.com, the typical overdraft fee was $35 per item as of September 2019. You may not realize that you have accumulated a lot of payments until you make several transactions. Don’t write a check or use your credit card for a small purchase — or if you have a different source of funding your debit card, you’re even a little unsure whether your funds will cover the purchase.

Banks have different overdraft fees and conditions. Depending on your bank, you may be able to use a credit card to protect against overdrafts when your bank charges an overdraft fee since a credit card will treat the transaction as a cash advance and have a high rate and no grace period.

Make Direct Deposits

Transactions handled by direct deposit are fully automated. The payer issues an electronic payment automatically transferred into the payee’s checking account upon receiving a direct deposit.

Direct deposit has become very common in recent years, with 94% of American workers getting their paychecks through this method, according to the American Payroll Association’s 2020 Getting Paid in America Survey. Because direct deposit occurs automatically, it is more convenient for the employee, who can rely on receiving their paycheck on payday without doing anything, and more economical for the employer, who does not have to print and distribute paper checks.

Direct deposits are set up in the same way, regardless of the payer. Direct deposits are set up as follows:

  • Fill out the direct deposit form. You may be asked to complete a natural deposit form by your employer (or another payer) and provide your name, address, Social Security number, and signature before the direct deposit occurs.
  • Include your account information. Apart from the above information, the most critical data on the direct deposit form is your bank or credit union account number. Direct deposits can only be initiated when you provide your bank or credit union’s routing number and account number.
  • Deposit amount. Your check amount will typically be deposited. There may be an option for you to deposit a percentage of a paycheck into your checking and savings accounts-for example, if you receive a salary.
  • Attach a voided check or deposit slip. Though your account information is typically provided on the direct deposit form, sometimes a voided check or deposit slip will be required to confirm that the payer is connecting to the correct account.
  • Submit the form. A direct deposit form contains a lot of sensitive information, so it’s essential to submit it carefully. When you work in an office environment, it would be good to give this form directly to your payroll department. Use a secure file transfer service instead of simply emailing the form if you submit it remotely.

Use Your Bank ATMs

The banks place ATMs inside and outside their branches. You can also find ATMs in high-traffic areas such as shopping centers, grocery stores, convenience stores, airports, train and bus stations, gas stations, casinos, restaurants, and other locations. ATMs found in banks are typically multi-functional, while those found off-site tend to be primarily designed for cash withdrawals.

To use an ATM, consumers must use a debit or credit card. Authentication of the consumer with a PIN is required before any transaction.

The chip on many cards transmits data from the card to the machine, and a code reader scans them just like a bar code.

Can You Dispute Fees

By calling their issuer, consumers can dispute fraudulent charges on their bills. Usually, the issuer will issue a new credit card soon after canceling the old one.

Disputes can also be filed against credit card charges you knowingly made. It can be due to not receiving services or dissatisfaction with those services. If you break something you bought online, your credit card company will help you get your money back.

If you wish to dispute a credit card charge unrelated to fraud, you must follow a formal process. It generally takes 60 days to act on a statement after sending it to you.

Online Bank Fees vs. Traditional Bank Fees

Online banks

  • You will do all your banking online or through a mobile app because online banks do not have physical locations.
  • If you follow the steps correctly, you can open an online bank account quickly and easily. You will need to provide your name, social security number, and email address. Nevertheless, after giving those details yourself, you will be able to create your new account within a few minutes.
  • Banks that offer an online platform that makes banking as easy as possible – Online banks focus on the user experience.
  • Fees associated with ATMs – Online banks may offer ATM access, but you should ask what in-network fees you may encounter and what cash limits you have on your account.
  • Banks with higher interest rates usually offer online services. Customers benefit from the savings because they do not have the same expenses as traditional banks – no buildings, for example.
  • Online banks charge few or no fees – When it comes to costs, online banks are the clear winners. In the same way, many online banks don’t need to reduce your interest yields to near nothing; they can also reduce fees.
  • Although many online banks have customer service departments, you may also chat with a robot or brow discussion boards.

Traditional banks

  • You can visit local banks via their branches – Chase and other banks have physical locations that you can see in person or via a drive-through. Thanks to the bank tellers, you can complete all your banking needs at these branches.
  • You’ll likely have to bring documentation and visit a branch during regular business hours if you’re opening an account with a traditional bank. Depending on how quickly your account is set up, you could wait anywhere from five minutes to an hour.
  • You can conduct your transactions online with some banks’ websites or mobile apps. Those apps, however, aren’t always as robust as online banks.
  • An extensive ATM network – Since traditional banks have branches, ATMs are also available at their network of ATMs.
  • A traditional bank might offer you 0.10% APY (or even 0.01% APY) on a savings account, but online banks are more likely to provide higher yields.
  • Usually, come with fees – A traditional bank might charge $10 or even $15 a month for just having a checking account.
  • A traditional bank has an edge in in-person customer service. Staffing bank branches with friendly faces is part of the overhead that keeps them from charging less.

Final Thoughts

Banks charge fees for various reasons, and the fees charged by banks are generally one of their primary sources of revenue. Despite people who avoid bank fees, there are still enough who pay them to contribute significantly to the bank’s bottom line.

It is common for customers to be charged fees, but some are very common and more likely to be charged.

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