How to Avoid Banking Fees

Did you know that Average Jane pays $7 a month in bank fees? That’s $84 a year that could have stayed in your pocket had you avoided banking fees. Fees can be avoided if you know what to look for when opening and using a bank account. Alternatively, many younger persons live the unbanked lifestyle, letting them avoid 100% of bank fees. Let’s take a closer look.

The Cavalcade of Shameful Banking Fees

Here’s a rundown of our 10 least favorite banking fees:

Monthly “maintenance” fee: This fee begs the question of what exactly is being maintained. Well, let’s assume the bank does something useful for this money, you can expect to pay anywhere from $4 to $25 a month to maintain a checking or savings account.

How to avoid: Some banks waive the monthly fee if you open both a savings and a checking account at the same time. You might also avoid this fee if you maintain a minimum balance in the account at all times. Another way to sidestep the fee might be to arrange a monthly direct deposit. The best solution is to use a bank that never charges a monthly fee. Many of these are online banks, but some also have physical branches.

ATM fees: You typically have to pay around $2.50 or more when you use an ATM that isn’t in your bank’s network. That can add up fast if you frequently withdraw money from an out-of-network ATM.

How to avoid: Using only in-network ATMs is the safest way to go, and your bank’s website should identify these machines. Alternatively, many merchants offer free cash back on debit card purchases when you check out. A few banks will partially reimburse you for ATM charges, but the amount is usually meager. If you must use an out-of-network ATM, take out more money than you immediately need to avoid extra charges and trips to the ATM.

Excessive transaction fees: The federal limit on savings account withdrawals is six/month, although this limit is being waived during the pandemic. You might have to pay an additional $3 to $25 per excess transaction.

How to avoid: Use a checking account in addition to your savings account and pay all your bills from checking.

Overdraft fees: An overdraft occurs when a bank pays a check for more than your balance. The cost is usually around $35 per incident.

How to avoid: Many banks let you automatically cover overdrafts from a savings or credit account, although these may have fees attached. Try to keep extra money in your checking account to avoid overdrafts.

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Not sufficient funds (NSF) fees: This is a “bounced check” fee when the bank doesn’t cover an overdraft. It’s also called a returned check fee and typically runs $35 or so.

How to avoid: Keep track of your funds in real time using a mobile app. Also, sign up for low-balance alerts from the bank. If your balance runs low, transfer money in from another account or make a deposit.

Wire transfer fee: This fee is almost obsolete, since there are apps that specialize in transferring funds. A wire transfer fee can run from $16 to $35.

How to avoid: Use the regular electronic funds transfer service attached to most bank accounts. Or use one of the aforementioned mobile apps to transfer money.

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Printed statement fee: You might have to pay a buck or two to get a printed statement from your bank.

How to avoid: Sign up for electronic statements. If you need a hard copy, print it at home.

Lost card fee: If you lose your card, expect to be hit with a replacement fee. The fee might be higher if you request a rush order.

How to avoid: Load your card information into an electronic mobile wallet and leave the card at home, safe and sound.

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Inactivity fee: You might be charged a fee when you don’t use your account for a specified period.

How to avoid: Pick a bank that doesn’t charge this fee.

Account closing fee: Usually applies when you close your account soon after opening it.

How to avoid: Pick a bank that doesn’t charge this fee or wait until the waiting period expires.

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Other Alternatives

If possible, use a credit union instead of a bank. Credit unions are much friendlier and usually have a lower cost structure, meaning smaller fees and fewer of them.

Or consider going unbanked, using substitutes like prepaid debit cards and money orders. You can buy U.S. Treasury securities and Savings Bonds to take the place of bank savings accounts. Several money transfer apps accept direct deposits. If you need a loan, you can avoid banks through peer-to-peer lending websites.

If you want to bank with the lightest of touches, consider an online bank. Fees are usually quite low because there is no overhead to pay for brick-and-mortar branches. Also, online banks frequently offer the highest interest rates on savings products.

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Eric Bank

Eric Bank is a business and personal finance writer who has been featured in Credible, Wisebread, CardRates, Zacks and many other outlets. He holds an M.B.A. from New York University and an M.S. in Finance from DePaul University.