However, financial institutions generate significant profits, with fees accounting for a sizable share of this. To compensate for those who don't, individuals who do pay bank fees often pay hundreds or even thousands of dollars annually. Discover what your bank's fees are, how much they cost, and how to avoid paying them
Account maintenance fees are standard practice at some financial institutions. You should expect to pay between $5 and $20 monthly for banking services, also known as maintenance or service fees, depending on your financial institution and the features you use. 2 It could be difficult, if not impossible, to keep the balance of an interest-bearing account above zero if you incur such costs every year.
There are two ways to avoid paying the regular maintenance cost. Instead of paying monthly fees to keep a paid account open, use a free one. Banking without fees is still possible. A modification to the Dodd-Frank Act implemented in the wake of the financial crisis saw major banks withdraw free checking accounts and raise maintenance fees.
Get a fee exemption if you meet the requirements. Simple enough: if you meet the bank's requirements, you won't have to pay the monthly service fee. Five typical exemption conditions are Organizing your paycheck to be deposited directly into your bank account (sometimes a minimum amount per month is required By maintaining a balance over a predetermined amount, say $1,000, you'll be rewarded with special benefits.
Overdraft Charges
Overdraft fees, which can be as much as or more than monthly maintenance fees over a year, are incurred if your account balance falls below the amount necessary for a transaction to be processed.
Banks typically charge approximately $35 in fees for each unsuccessful transfer. For instance, if you have $1 in your account but spend $4 using your debit card (and enrolled in your bank's overdraft protection program), you will pay $35 to borrow the additional $3. If you use the ATM again after that, you can be charged an additional $35.
Due to the requirement of opting in for overdraft protection services, overdraft fees are often optional. Most importantly, if you don't opt in, your debit or ATM transaction will be refused, and you won't incur any overdraft fees (you can probably pay with cash or another card).
It's a good idea to look into your overdraft protection choices if you are interested in doing so. Financial institutions vary in their ability to assist customers who experience temporary cash flow problems by offering services such as transferring funds from a savings account to a checking account or providing access to emergency lines of credit (which impose a fee when you tap the line of credit and charge interest on the amount you borrow).
Refusing Service Isn't Enough
You might think you're safe if you've never enrolled in overdraft protection. If your account balance drops to zero and further charges are made, you may still be subject to overdraft fees. When you sign up for an automatic mortgage or insurance payment, the biller might deduct the required amount from your bank account regularly. In contrast to debit and ATM transactions, banks typically cover the cost of recurring electronic payments and checks and subsequently charge you an overdraft fee, even if you've opted out of this service.
Things You Can Do Keeping track of your current and projected balance for the upcoming week will help you avoid these bank fees. Maintaining a regular balancing routine can help you keep track of your transactions, both those that have been processed and those that are still pending. While your bank may indicate that you have a particular amount of cash on hand, you likely have not paid all of your bills yet.
You could establish an overdraft line of credit as a safety net. It's not ideal, and we hope you won't make it a habit, but it can be a cheaper approach to deal with accidental problems.
Charges for Insufficient Funds
The bank may reject an electronic withdrawal or an unpaid check if the account holder does not have enough money in the account to cover the withdrawal or the check's face value. While the bank will not be responsible for the cost, it may still assess a fee for the failed transaction, known as a non-sufficient funds (NSF) fee. These banking fees are similar to overdraft costs, which average roughly $35 per unsuccessful transaction.
To prevent non-sufficient funds fines, it is important always to have enough money in your checking account to pay your expenses. Set up notifications in your bank account if this is impossible due to a lack of funds or unanticipated withdrawals from billers. Thus, you can receive alerts from your bank through email or text message when your account balance drops dangerously low, giving you ample time to rearrange payments or withdraw money from an emergency fund.
