Bank fees have skyrocketed since the financial industry's near-death experience during the 2008 economic collapse. That's why its important that individuals and small businesses avoid the four most expensive mistakes they can make with checking and savings accounts.
You can opt into overdraft protection at most banks and let your checking account go below zero to complete a transaction. However, banks charge dearly for this service, with the average overdraft fee at $30 according to a 2017 study by Moebs. The danger starts when running the account close to zero and getting hit with an unexpected charge or debit. The overdraft fee adds to the negative balance and can cascade, with new transactions triggering additional overdraft fees.
For example, you think there's $100 in the checking account, forgetting the monthly car payment is charged automatically. The payment is made, but you're hit with a $30 fee. The account is now negative and additional transactions will trigger $30 fees until you add funds that bring the balance above zero. The easiest solution in this dangerous situation is to sign up for email or text alerts that warn when the account balance is low. For more, see How Overdraft Fees Work and How to Avoid Them.
Many banks reduce or eliminate monthly maintenance and other fees if you keep a certain amount of money in your account at all times. This fee break can often outweigh interest accrued in your savings account and it's also worthwhile to keep the minimum in your checking account. The average checking balance needed to avoid fees has risen to $1500 in recent years, but check with your bank for its latest requirement.
A personal check is nothing more than a promise to pay someone and does not represent actual payment until it is presented at a bank and the money is withdrawn from your account (see How to Write a Check in 5 Easy Steps). Post-dating a check to a future date indicates your intention that the recipient to wait until that date to present the check to the bank.
However, banks have the upper hand and are legally allowed to honor checks when presented, regardless of the posting date. If the recipient is not someone you trust, it is safer to hold onto the check until the date when you are ready to release the funds to avoid playing havoc with your bank balance. Saying it another way, the convenience of providing post-dated checks is outweighed by the risk to your account.
Most banks charge a fee when users who are not customers access their ATM machines. Some also charge a fee when their own customers use another bank's ATM machines. These fees are also on the rise, with the average out-of-network ATM cost rising to $4.69 according to a 2017 Bankrate survey.
The easiest way to avoid these fees is to use your own bank whenever possible to make withdrawals while limiting spontaneous trips to another bank's ATM. Also keep in mind that some banks will refund other institutions' transaction fees; look for this valuable feature when shopping around for a checking account. (See Is a Premium Checking Account Worth It?)
It is more important than ever to learns the ins and outs of bank fees and the steps you can take to pay the least amount possible. To get started, find out your bank's current policies and be on the lookout for lower fee accounts.