How to avoid these 12 banking fees
How to Avoid These 12 Banking Fees
Let's face it: banking fees can affect anyone at some point. While fees might seem small initially, they can add up fast and eat away at your hard-earned money. It's important to be aware of banking fees and avoid them whenever possible. In this article, we'll look at some of the most common fees and why they exist and offer practical tips on how to avoid them. Understanding these fees can help you save money and maximize your banking experience.
What Are Banking Fees?
Banking fees are charges or costs financial institutions implement for using their services. These fees include account maintenance, ATM usage, overdrafts, foreign transactions, wire transfers, and more. Financial institutions charge these fees to cover their costs and generate revenue. While some of these fees are unavoidable, many can be avoided or minimized through careful planning and management of your accounts.
12 Common Fees
1. Monthly Maintenance Fee - Some financial institutions charge this fee for maintaining your account. These fees vary and may seem like unnecessary expenses. However, avoiding them is often easy. One way to avoid the fee is to open a checking and a savings account at the same financial institution. Additionally, maintaining a minimum balance in your account or setting up a monthly direct deposit is sometimes enough to waive the fee. Check with your financial institution to find out what you need to do to avoid this fee.
2. ATM Fee - You'll often pay this fee if you use an ATM outside your financial institution's network. Out-of-network fees can add up quickly if you frequently withdraw cash. To prevent these fees from taking a toll on your finances, use in-network ATMs whenever possible.
3. Overdraft Fee - An overdraft happens when you use your debit card or a check to spend more money than you have available in your account. For example, if you have $50 in your account and spend $100, you'll overdraw your account. Some financial institutions offer overdraft protection, which means they'll cover the shortfall, but this service usually comes with a charge.
To avoid these fees, keeping track of your account balance is essential. One way to do this is to sign up for balance alerts. These alerts can be set up to send you a text message when your balance falls below a certain amount, such as $50.
Another way to avoid getting dinged for overdrafts is to link your checking account to a savings account to cover any shortfalls. There still may be a small fee to pull from your savings account. You can also opt out of overdraft protection. This means that if you don't have enough funds in your account to cover a purchase, your financial institution won't cover it. For example, if you want to buy something for $50 but only have $25 in your account, your card will be declined.
4. Insufficient Funds Fee - If you make a purchase that exceeds your checking or savings account balance and have yet to opt for overdraft protection, the financial institution may decline or return the charge unpaid. This fee can be particularly frustrating because it can be charged even if the transaction doesn't go through.
To avoid an insufficient funds fee, keep track of your balance and set up alerts for low balances so you can transfer or deposit money to avoid having insufficient funds. Fortunately, financial institutions are not permitted to charge both insufficient funds fees and overdraft fees for the same transaction.
5. Card Replacement Fee - There's usually a charge if you need to replace your ATM or debit card (except for fraud). This fee can be particularly frustrating because it's often out of your control.
To avoid this fee, ask your financial institution if they'll send you a replacement card for free. For an added layer of security, consider uploading your card to a mobile wallet and using it for contactless transactions.
6. Check Ordering Fee - While checks are less common, they still have their place in certain transactions. When you open a new account, you may receive a pack of starter checks, like regular checks, without your name and address. However, if you need more checks, you may have to pay a fee to order them. Fortunately, many financial institutions offer free checks to customers/members who meet specific criteria, such as maintaining a minimum balance or setting up direct deposit. You can avoid check ordering fees altogether by using online bill pay.
7. Wire Transfer Fee - Wire transfers can be a fast and convenient way to transfer money, but they come at a cost. It's best to use wire transfers only when necessary for significant sums of money transactions. Otherwise, you can transfer funds through your financial institution's online or mobile app to avoid wire transfer fees.
8. Foreign Transaction Fee - When you use your debit card outside the U.S., you may be charged a foreign transaction fee. These fees are typically charged for purchases and using ATMs abroad. Visa and Mastercard charge a percentage as a foreign transaction fee, and some financial institutions may also charge an additional percentage. Keep in mind that when using an ATM while abroad, you may be charged an out-of-network ATM fee in addition to the foreign transaction fee.
Foreign transaction fees are challenging to avoid when using your debit card abroad. However, you can reduce these fees by withdrawing more money at once to avoid multiple ATM visits. It's important to consider safety when carrying large amounts of cash.
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9. Paper Statement Fee - Digital statements are usually provided for free by most financial institutions. You can easily access your latest statement by logging into your online account each month. However, if you prefer paper statements mailed to your home, you may pay a monthly statement fee.
You'll need to opt out of paper statements to avoid these fees. If you've received a statement by mail, you're currently enrolled. To check your status, you can contact your financial institution and ask about your statement delivery method.
10. Excess Transaction Fee - Excess transaction fees can be charged when savings and money market account holders exceed the federal limit of six free withdrawals and transfers per month. This fee can quickly add up if you regularly exceed the limit and may cause frustration.
To avoid excess transaction fees, monitor your account activity and ensure that you stay within the allowed transaction limit. If you're dipping into your savings too often, keep a bit more cash in your checking account as a backup. Another idea is to look for a financial institution that doesn't charge extra fees for making too many transactions from your savings account.
11. Inactivity Fee - If you haven't made any deposits or withdrawals from your account in a long time, you might get hit with a dormancy or inactivity fee. This charge often kicks in after a few months of zero activity.
To avoid getting dinged with this fee, you can set up automatic transfers, like paying a bill from the account every month or moving a set amount of money into it from time to time. If you don't use the account, close it to avoid the fee.
12. Early Closure Fee - If you close your account shortly after opening it, you may pay an early account closure fee. Many financial institutions impose this fee if you close your account within 90 days of opening it. Some financial institutions have a longer window and require you to keep the account open for up to 180 days to avoid the fee.