The Ins and Outs of Bank Fees

October 12, 2018 — 7:25 AM EDT

To make a profit and pay operating expenses, banks typically charge for the services they provide. When a bank lends you money, it charges interest on the loan. When you open a deposit account (checking or savings) there are fees for that as well. Even fee-free checking and savings accounts have some fees.

It’s important to know all the fees your bank charges, as well as how to reduce or eliminate as many of them as possible. It all starts with an understanding of the fees that banks levy.

Monthly Account Maintenance Fees

One of the most common and straightforward fees banks charge is a monthly account maintenance fee for your checking or savings account. According to MoneyRates.com the average monthly maintenance fee is more than $13 per month. That means $156 a year just for having the account.

Minimum Balance Fees

Many banks will reduce or eliminate the monthly maintenance fee if you maintain a minimum balance in your account. The minimum can be anywhere from $500 to $1,000 or more. Unfortunately, if you fall below the minimum, you must pay the maintenance fee for that month. Worse yet, even if you maintain the minimum you are effectively giving your bank an interest-free loan. The bank can use a portion of your money to make money and you get nothing in return.

Overdraft/NSF Fees

If you overspend the amount in your account (commonly known as ‘bouncing a check’) your bank can levy an overdraft fee, also known as a nonsufficient funds (NSF) charge. This can happen when you write checks against a recent deposit that hasn’t cleared the bank yet. In addition to the overdraft fee, which Bankrate says averaged about $33 per transaction nationally in 2017, your bounced check may result in an additional charge from the receiving party if it’s a business or other creditor.

Overdraft Protection Fees

One way to guard against overdraft/NSF fees is to elect overdraft protection. Unfortunately, this protection also comes at a cost. With overdraft protection, your bank will advance you enough to keep from triggering an overdraft charge and the receiving party will be paid. Your bank will still charge you a fee for advancing you the money. The current national average overdraft protection fee is also about $33, according to MoneyRates.com.

Returned Deposit Fee

If you deposit a check from someone else that bounces, you can be charged a returned deposit fee, which MyBankTracker says averages just under $13 per item. As you might imagine, this could also trigger overdraft or overdraft protection fees if you write checks against this deposit before you put additional money in your account. Returned deposit fees can occur due to insufficient funds, a stop payment or even a closed account on the part of the person who gave you the check to deposit.

Additional Checks Fees

When you open your checking account your bank will likely give you a free supply of checks to use. With most banks, after the initial supply is gone, you must pay for replacements. You can order them from your bank for as much as $35 or from a private supplier such as Walmart for about $15.

Cashier’s Check Fees

If you have reason to go to your bank and get a cashier’s check – to pay someone who wants the assurance such a check will clear, for example – it will cost you. According to MyBankTracker, the average cashier’s check costs about $9.

Paper Statement Fees

In an age when most people read their bank statements online, it’s not surprising that many banks charge to print and send you a paper version. Fees vary but range from $1 to $5 generally.

ATM Fees

Most banks let you use their automated teller machines (ATMs) free. If you use one outside your bank’s network, you may pay that outside bank a fee of around $4 or more. Your bank may also charge a similar fee for processing your use of an ATM outside your bank’s network. Some accounts refund all ATM fees or up to a certain limit per month.

Debit Card Transaction Fees

Some banks charge a fee when you use your debit card (or bank card) to make a transaction. For those that do charge, the fee is typically $1 to $2. Interestingly, some merchants give you rewards in the form of cash back (or a discount) for making a debit purchase because the cost to them is lower. You aren’t likely to be charged a fee to use your debit card at an ATM unless it’s one that is not in your bank’s network.

Lost Card Fees

If you lose your debit card or need to replace it for any reason your bank may charge a fee of $5 for regular replacement up to $30 for rush service. Regular replacement may take a week or longer. Rush treatment can be as quick as overnight.

Foreign Transaction Fees

You may pay a foreign transaction (FX) fee if you use your bank credit card to make a transaction that passes through a foreign bank or in a currency other than the U.S. dollar. The most common FX fee is 3% of the total amount of the transaction.

Wire Transfer Fees

A wire transfer, which allows you to pay someone or send money to them almost instantly, almost always comes with fee when sent (outgoing wire transfer) and sometimes even when received (incoming wire transfer). The fee is typically around $30 for outgoing and about $15 when there’s a charge for an incoming wire transfer.

Savings Withdrawal Fees

Federal Deposit Insurance Corp. (FDIC) Regulation D allows only six withdrawals from each savings deposit account you have each month. Exceeding that amount will likely result in a fee of around $15 from your bank. Continued violations of the six withdrawals rule can result in having your savings account closed or turned into a checking account. Checking accounts have no withdrawal limit. It’s important to know that overdraft transfers from your savings account count toward the six withdrawals you are allowed each month.

Inactivity Fees

Strange as it may seem, not using your savings or checking account may also result in a fee known as an inactivity fee. Not all banks charge this fee. For those that do, a typical fee is about $10. In many cases, it kicks in after about six months of inactivity.

Account Closing Fees

Banks that charge a fee to close an account typically only do so if your account hasn’t been open very long (often less than six months). The fee varies from bank to bank, but can be as much as $25 per account.

Negative Interest

Negative interest, sometimes referred to as negative interest rate policy (NIRP), isn't a fee per se, but rather a type of monetary policy in which banks pay an interest rate of less than zero. Effectively, negative interest means you pay the bank to use your money. Negative interest is not practiced in the U.S. and there is little chance it ever will be, according to experts. In theory, NIRP could be enacted in times of strong deflation to incentivize people to spend or invest their money instead of hoarding (saving) it.

If your checking or savings account pays little or no interest and the fees you pay are high, it can have the same effect as negative interest. Your goal should be to keep fees as low as possible to avoid a “negative interest impact” on your bank accounts. 

Limiting Bank Fees

To that end, here are some ways you can reduce or eliminate bank fees to ensure the money you deposit in checking and savings is used by you and not by your bank.

  • Shop around for maintenance-fee free checking and savings accounts at online or brick-and-mortar banks, preferably accounts that pay interest and charge the lowest fees, especially for services you use. If, for example, you never send wire transfers, don’t worry about those fees and instead concentrate on services, such as a widely available ATM network, that will matter to you.
  • Read the fine print before signing up for any account, typically found in a fee statement or disclosure and often appearing in a tiny font at the bottom of the bank’s web page.
  • Check account statements regularly for unexpected fees and make sure you avoid those fees in the future.
  • Meet minimum balance requirements if you can’t find an account with a "no minimum balance" requirement you like. Make sure you’re able to maintain the balance to avoid a fee.
  • Avoid fancy checks, which always cost more, by remembering that your payees don’t care what your check looks like – they only care that they get their money. Also, checks purchased through your bank are almost always more expensive than those bought from a trusted private supplier.
  • Use a credit card – or the credit card function on your debit card – to avoid debit card transaction fees.
  • Use a bank that reimburses out-of-network ATM fees.
  • Withdraw cash from a bank teller to avoid ATM fees.
  • Get cash back when making a purchase at a retail establishment.
  • Take out larger amounts of cash less frequently to plan for future expenditures.
  • Don’t elect overdraft protection, but keep tabs on your balance to avoid an overdraft fee or be willing to have debit card transactions declined if your balance gets too low. There are pros and cons to overdraft protection so it's best to study them before committing.
  • Link savings or a line of credit to checking to obtain less expensive (even free) overdraft protection.
  • Seek a bank with free or discounted wire-transfer services if you use that service frequently. Some banks offer a “bulk” discount if you wire money on a regular basis.
  • Use automated clearing house (ACH) transfers instead of wiring funds. It costs less but is slower – ½ day for wired money, 1 to 3 days for ACH.
  • Consider peer-to-peer (P2P) services such as Popmoney, Zelle, Google Wallet, PayPal or Venmo instead of a wire transfer whenever possible. As with ACH, P2P can take longer but is less expensive.

The Bottom Line

Banks provide a tremendous service, and our economy probably couldn't function without them. As this article clearly shows, these services aren't free. The best protection you have is to be aware of the fees you are paying and not blindly accept them. Knowing the ins and outs of bank accounts, credit, fees and savings can help you avoid costly mistakes.

Use the tips in the Limiting Bank Fees section to reduce your exposure and always remember: Your bank is a business. If you don't like the fees you are paying and can't get them reduced, take your business elsewhere.