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Understanding Bank Fees And How To Avoid Them

Sarah Sharkey6-Minute Read
August 05, 2021

Bank fees can sneak up out of nowhere and add up quickly when trying to stick to your budget. Although bank fees may seem like an unavoidable part of life, it is possible to avoid bank fees in many situations.

Let’s take a closer look at the different types of fees banks charge, and how to avoid the pesky bank fees you would prefer to live without.

What Are Bank Fees?

Bank fees are charges that financial institutions impose on their customers for account services such as set-up, monthly maintenance and other common transactions. These fees will vary depending on your bank and the type of account you hold with them.

You may run into one-time fees or monthly charges that can add up quickly. Whether you are working with a credit union or a bank, it is important to keep an eye on the bank fees associated with your account. 

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Types Of Fees Banks Charge

Bank charges can be a thorn in your banking experience. The best way to avoid excessive bank fees is to be aware of them before they hit your account.

Let’s explore 10 of the most common bank fees that you might encounter. Additionally, we will share ideas on how to avoid these pervasive fees.

1.  ATM Fees

  • Average fee: $3 to $4
  • How to avoid this fee: Use an in-network ATM and avoid excessive withdrawals.

ATM fees occur when you withdraw cash from your account. Typically, you’ll encounter an ATM fee when you use an ATM that isn’t within your bank’s network. But you could also run into this fee at an in-network ATM for what your bank deems as excessive withdrawals. The definition of “excessive” varies widely among financial institutions, so be sure be aware of your possible limitations.  

Depending on your banking needs, you may not have to worry too much about ATM fees. But if you regularly withdraw cash from an ATM, these fees could add up quickly. The best way to avoid this type of fee is to only use in-network ATMs. Additionally, make sure that you don’t exceed any withdrawal limits set by your bank.


2.  Overdraft Fees

  • Average fee: $35
  • How to avoid this fee: Regularly monitor your account and sign up for low-balance alerts.

A financial institution may charge an overdraft fee when you try to make a purchase without enough money in your account to cover it. For example, let’s say you have $10 in your checking account but complete a $15 transaction. At that point, the bank would charge an overdraft fee because your account is in the red – you’re $5 short.

You can think of overdraft protection as a short-term loan from the bank. The bank will spot you the funds you need to complete your transaction. But that protection will come at the cost of approximately $35 per overdraft.

A good way to avoid this fee is to make sure that you have the funds in your account before completing a transaction. However, this can be easier said than done if you have multiple bills set up on autopayment with your account. Consider signing up for balance alerts from your bank to easily keep tabs on your balance.

3.  Insufficient Funds Fees

  • Average fee: $35
  • How to avoid this fee: Set up low-balance alerts and regularly monitor your account.

An insufficient funds fee is very similar to an overdraft fee. Like an overdraft fee, the bank will charge you for not having enough money in your account for a particular transaction. But unlike an overdraft, the bank will not allow the transaction to be completed.

You might encounter an insufficient funds fee if you write a check that bounces or try to make a payment that you don’t have the funds to cover. A good way to avoid these fees is by signing up for a low balance alert.

4.  Monthly Maintenance Fees

  • Average fee: $5 to $25 a month
  • How to avoid this fee: Meet specific qualifications to avoid this fee or find a bank that does not charge monthly fees.

A financial institution can charge a monthly maintenance fee to keep your savings account or checking account in good standing. Typically, accounts with more attractive perks will command a higher monthly maintenance fee.

However, most banks will offer several different ways to waive the fee by meeting different criteria. For example, you might have to maintain a particular balance or complete a set number of transactions to have your monthly maintenance fee waived.

If you want to work with a bank that charges these fees, you’ll need to keep track of your activity to meet their qualifications if you want to avoid the fee. But you could decide to work with a financial institution that doesn’t charge any monthly maintenance fees at all.

5.  Inactivity Fees

  • Average fee: $10 to $25
  • How to avoid this fee: Use periodically or close an account if not needed.

If you don’t use your account for a particular period of time, you may be charged an inactivity fee. When you have a bank account that you use infrequently, you can avoid this fee by simply closing your account. Otherwise, you’ll have to periodically make a transaction to keep your account active.

6.  Foreign Transaction Fees

  • Average fee: $1.50 to $5 for ATM withdrawals and 1% to 3% on purchases
  • How to avoid this fee: Use a bank or travel credit card that does not charge these fees.

Foreign transaction fees occur when you use your credit or debit card outside of the country. You may also encounter a higher ATM fee if you use your card to take out cash in a different currency.

Typically, you’ll have to pay between 1% to 3% of the transaction total if it is made in a foreign country. Although foreign transaction fees can seem relatively small, they can add up quickly.

The best way to avoid foreign transaction fees is to seek out a bank or travel credit card that doesn’t charge them at all. You won’t have to worry about these fees eating into your vacation budget with the right card.

7.  Paper Statement Fees

  • Average fee: $1 to $2
  • How to avoid this fee: Sign up for digital statements.

If you choose to receive a paper statement in the mail, your financial institution may charge a fee for that service. After all, the bank will have to print the statement, mail it, and pay for the delivery of the statement.

Typically, you can easily opt out of paper statements to avoid this fee. Plus, eliminating your paper statements can help to save the environment with less paper consumption and minimal strain on delivery resources.

8.  Wire Transfer Fees

  • Average fee: $20 to $35
  • How to avoid this fee: Try online banking or other transfer methods.

A wire transfer is the process of securely transferring funds electronically from one bank account to another through a network of connected banks. To access this secure network, you will have to pay wire transfer fees.

If you regularly move funds from one bank account to another, wire transfer fees can become a nuisance. But luckily, there are alternatives to wire transfers that come with fewer fees. These include direct deposit, bank transfers, person-to-person payment tools, checks and money orders.

Explore the other options available to find a suitable way to transfer funds without paying a wire transfer fee.

9.   Lost Card Fees

  • Average fee: $5 to $30
  • How to avoid this fee: Switch to a bank that does not charge for replacements.

When you lose your physical credit card or debit card that is associated with your account, most banks will charge a lost card fee. Depending on your situation, you may even be forced to pay a higher fee for the express delivery of your replacement card.

Of course, this fee wouldn’t be an issue in a perfect world because you would never lose your card. But in the real world, things happen, and it is entirely possible for you to lose your card multiple times. With that, an easy way to avoid this fee is to work with a bank that doesn’t charge for replacements.

If you don’t want to switch banks, then consider opting out of any express delivery options for replacement cards.

10.   Closed Account Fees

  • Average fee: up to $25
  • How to avoid this fee: Wait for the probationary period to end.

When you close your bank account, the last thing you would expect is to be slapped with a parting fee. But unfortunately, you can be charged a closed account fee in some situations. Typically, you’ll face a closed account fee if you close your account quickly after opening it.

The best way to avoid this fee is to read the fine print of your bank account. If there is a probationary period, wait until that is over before closing the account.

The Bottom Line

Bank fees can be a hassle. But with the right tips, you can avoid most of them.

Want to learn more about how to properly manage your personal finances? Check out the free resources offered by Rocket HQSM.

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Sarah Sharkey

Sarah Sharkey is a personal finance writer who enjoys diving into the details to help readers make savvy financial decisions. She’s covered mortgages, money management, insurance, budgeting, and more. She lives in Florida with her husband and dog. When she's not writing, she's outside exploring the coast. You can connect with her on LinkedIn.