Bank Fees and How to Avoid Them

The number and cost of fees connected to everyday banking has become an increasing cause for complaint among U.S. consumers. As government regulation of banks tightens, and the banks’ operating costs increase along with it, the frustrating trend of introducing fees for even the most basic of services has many people wondering – what can you do to keep hold of your own money?

Though most have stopped charging out of linear order thanks to consumer backlash, ask your bank about the way it calculates overdraft charges.

Banks traditionally have two tried and tested ways to make a profit – and remember, they are a business, and their goal at the end of the day is to make money. This is done by charging interest on loans given, and charging for services they offer you: the use of a debit card, the use of ATMs, providing and overdraft ,and even basic checking accounts are often no longer free. There are, though, ways to avoid certain fees and to ensure you get the most bang for your buck.

Some of the most common fees can also be the hardest to get around. The minimum balance fee in a personal checking and/or savings account will see you charged a monthly fee if your balance dips below a pre-specified amount. What exactly classifies as falling below the minimum balance depends. It could mean the average monthly balance, the end of month balance, or even if you drop below the required amount for a single day. Find out when opening an account which, if any, of these rules apply. Also consider keeping all your checking and savings accounts with the same bank – by pooling your money you can sometimes get around the more stringent minimum required amounts. Many banks will also drop the charges if you sign up for other services, such as monthly direct deposit.

ATM fees can be deceptively high – nearing $2 for the use of another bank’s ATMs in 2011. There’s no easy get out here, apart from making sure you stick with your own bank’s machines. Some online banks will reimburse other banks’ ATM fees; USAA, for example, will pay back up to $15 a month. If you’re travelling, contact your bank to see if they have any reciprocal agreements with banks in major cities, or are part of a no-fee network such as MoneyPass.

Debit card charges are a controversial move on banks’ parts. In 2011, Bank of America faced consumer outrage after it was announced that they planned to begin a $5 monthly fee for the use of debit card. If you find yourself with a bank fee for debit card use, the simplest move it to instead use a credit card and pay it off each month. Local and region-based banks and credit-unions (rather than national banks) may offer fee-free debit cards for longer, though, so explore those options.

Now we get to the real hot button topic: overdraft fees. A few years ago, JP Morgan Chase faced legal action over allegations that their process for overdraft fee calculation was weighted in favor of large transactions, rather than the time at which transactions took place. Basically, your transactions would be rearranged by the bank from highest to lowest, emptying your account quicker, and leading to multiple overdraft fees (around $30 a pop, national average). In 2012, the bank decided to settle the class action, which as explained by a recent post on my website, refers to a lawsuit brought by one party on behalf of a group of individuals with similar legal claims against a defendant, typically a company or organization.

Though most have stopped charging out of linear order thanks to consumer backlash, ask your bank about the way it calculates overdraft charges. Consider getting your checking account linked to your savings account, or a line of credit, so that money can be transferred in should you need it. Sovereign Bank, for example, offers Overdraft Protection with a one-time fee of $12 if it’s ever needed.

It’s important to know what you can expect when it comes to bank charges and fees. Some fees, such as those for replacing a lost card or a foreign transaction fee, are a nuisance but hard to get around. Others, such as inactivity fees - often $10 a month or more, - are easily avoided as long you make sure you fulfil the minimum activity requirements. The fee’s purpose is to stop you keeping the account dead, but unused, if you’re trying to avoid an account closing fee; however, if you’re not careful, it could cost you in the long run. Equally, any paper statement fee can be side-stepped by switching to online banking.

Avoid bank fees by being proactive. Read your bank account’s terms, and make sure you know your own responsibilities.