In 2017, consumers spent an average $329 on bank fees, according to the Bank Fee Finder Report from online banking provider Chime. The company analyzed information from 5,000 individual accounts, of which 83 percent were held in five national banks: Bank of America, Citibank, JPMorgan Chase, Wells Fargo and U.S. Bank.
Stephen Novak, senior vice president and director of retail banking for Bryn Mawr Trust, says fees are much like any other product and are subject to inflation over time. “When [the price of] milk goes up, I don’t see so many people complaining,” he says.
However, there are times in which it can seem excessive to pay a fee for activities that seem routine, such as getting a paper statement in the mail or withdrawing money from an ATM. Fortunately, they are ways to avoid these irksome charges.
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“Most banks have hoops you can jump through in order to avoid the fee, but you have to be aware of them,” says Kelsa Dickey, financial coach and founder of Fiscal Fitness Phoenix.
Here are five frustrating bank fees — and strategies to avoid paying them.
1. Overdraft fees. If you spend more than what’s available in your account, your bank is going to charge a fee to either cover the transaction cost or return your payment or check. That may seem fair, but the additional charge can be excessive, especially if all your bank is doing is electronically returning an automated payment.
These fees — known as overdraft, nonsufficient funds or NSF charges — vary widely, depending on the financial institution. Bank5 Connect, which operates online, charges only $15 for insufficient funds, while Fifth Third Bank in the Midwest will assess $37 for each overdraft occurrence, up to five per day.
There are several ways to avoid overdraft fees. One way to sidestep overdraft charges is to be diligent with record-keeping to ensure your account always has an adequate balance. Another is to opt out of overdraft protection, which will result in debit card purchases being declined if there are insufficient funds.
Some banks will let you link a checking account to a savings account or a line of credit, enabling you to transfer funds in the event of an overdraft. But this option isn’t always without costs either. For instance, TD Bank charges a $10 overdraft protection transfer fee.
2. ATM fees. The currency exchange platform TransferWise surveyed 1,000 U.S. adults and found ATM fees were the most well-known charge assessed by financial institutions, recognized by 91 percent of respondents. They are also one that people often label as unreasonable. “You should not be charged to get your own money,” says Bobbi Rebell, a certified financial planner and partner with TransferWise.
Jonathan Scott, professor of finance at Temple University’s Fox School of Business, says ATM fees are the ones that often cause his students the most trouble. “If you’re taking out small amounts and paying $2 to $3 [each time], that’s incredibly expensive,” he says. Plus, someone might end up paying two ATM fees for one transaction — one to a person’s bank and the other to the operator of the ATM.
Avoiding ATM fees can be simple though. Use your own bank’s ATM, withdraw cash from the teller or use other free options, like asking for cash back when making a debit card purchase at the grocery store.
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3. Monthly service fees. Gone are the days of free checking accounts. Today, most banks now charge a monthly service fee or minimum balance charge for their accounts. These can vary depending on the type of account. At Chase, a basic total checking account costs $12 per month, while a premier plus checking account costs $25 a month. In exchange for the higher fee, the premier account earns interest, offers free checks and waives other fees.
Many banks, including Chase, will waive the fee for consumers who make direct deposits into the account, maintain a minimum balance or have a mortgage with the institution.
Another way some banks let customers avoid monthly service fees is to make a certain number of debit card transactions each month, Dickey says. The LifeGreen eAccess Account at Regions Bank is one example of an account that will waive the fee if an account holder uses their check card 10 times during a statement period. “I recommend a client find 10 [monthly] bills that are fixed that can satisfy that requirement easily and consistently.” Once those payments are set up, the account holder should have the monthly service fee waived.
4. Paper statement fees. “Another ridiculous fee is to have paper statements printed,” Dickey says. While paper statements used to be standard, many banks now charge for them to be mailed. At U.S. Bank, customers pay $2 for a paper statement while Bank5 Connect charges $1 per statement. You’ll also pay at some banks if you request a copy of the statement be printed. For example, Bank of America charges $5 for that service.
These fees can be avoided by signing up for online banking and paperless statements. Some banks, like U.S. Bank, may waive the paper statement fees if you have certain checking accounts.
5. Withdrawal fees. If you exceed six withdrawals from your savings account in a month, you’ll get hit with an excessive withdrawal fee. Often assessed at $15, this fee isn’t a money grab by banks. Instead, it’s a requirement of Regulation D from the U.S. Securities and Exchange Commission. The government rule limits how often savings accounts can be accessed.
It may seem unreasonable to be unable to access savings when and how you want, but Rebell says there’s a reason for the rule. “They want to have that stability in the savings accounts,” she says. Since those accounts are the basis for bank lending, Regulation D is intended to help ensure an appropriate level of cash reserves.
Overdraft transfers from savings can also count toward the six monthly withdrawals and could trigger excessive withdrawal fees. To avoid the extra cost, consider other forms of overdraft protection or be strategic about how you make withdrawals.
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When it comes to avoiding high bank fees, Novak says financial institutions tend to reward those who have larger balances or multiple accounts. “The greater your relationship with them, the more stuff you get [for] free,” he says. That may mean free checks and money orders as well as waived fees. You may also want to consider shopping around for a bank with lower fees. Community banks and credit unions traditionally have lower costs than national institutions. However, there is only so much consumers can do to lower their costs, Rebell says. “At the end of the day, [banks] will charge what they want.”
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5 Unfair Banking Fees and How to Avoid Them originally appeared on usnews.com
