When choosing a financial institution, including online banks, it’s important to remember that all institutions will not serve you the same. Each bank has its own policies, services, and fee structures, which means there isn’t a one-size-fits-all option. One of the most important factors you need to consider is the fees that banks charge. While some fees may seem small or insignificant, they can add up over time and have a significant impact on your savings. However, by understanding the common types of bank fees and how to avoid them, you can make informed decisions that will help you save money in the long run.
What Are Bank Fees?
Bank fees are charges that financial institutions impose on the services they provide. These fees can vary widely depending on the bank and the type of account you hold. Before signing up for an account with a new bank, it’s crucial to check on the bank’s website or visit a branch to inquire about the potential fees you might have to bear.
Common Bank Fees and How to Avoid Them
Monthly Maintenance/Service Fee
This fee is charged by banks to cover the cost of maintaining your account each month. Some banks may not charge a monthly fee at all, or they may waive it if you maintain a certain balance in your account. However, others may charge a small amount per month. Opting for a low or no-fee account can help you save money, but it may come with limitations, such as a cap on the number of withdrawals you can make each month.
How to Avoid It?
Choose your account carefully. Ask your bank if they charge a monthly maintenance fee and what the conditions are for waiving it. If you can meet the minimum balance requirements or make a certain number of purchases each month, you may be able to avoid this fee entirely.
Out-of-Network ATM Fees
Every bank has its network of ATMs, and using an ATM within this network typically doesn’t charge any additional fees. However, if you use an ATM that’s outside of your bank’s network, you’ll likely be charged a fee.
How to Avoid It?
If you need to withdraw cash from an out-of-network ATM, try to withdraw a larger amount to minimize the number of transactions and avoid accumulating multiple fees. Some banks also offer waivers or refunds for out-of-network ATM fees, so it’s worth checking with your bank.
Overdraft Fees
An overdraft fee is charged when you spend more money than you have in your account. Overdraft fees can sometimes be high and added per transaction, which can quickly add up if you’re not careful.
How to Avoid It?
Set up account alerts to notify you when your balance drops below a certain threshold. This will help you avoid overdrawing your account. You can also ask your bank if they offer overdraft protection, which transfers money from a linked account to cover any shortfalls. While this service may come with a small monthly fee, it can help you avoid more expensive overdraft fees.
Insufficient Funds Fees
Insufficient funds fees are similar to overdraft fees, but they are charged when a transaction is rejected due to insufficient funds in your account. The fee is typically about the same as an overdraft fee and can be just as costly.
How to Avoid It?
Monitoring your spending, setting balance alerts, and opting into overdraft protection are effective ways to avoid insufficient funds fees.
Paper Statement Fees
Some banks charge a fee for printing and mailing physical copies of your bank statements. This fee is usually small, but it can add up over time if you don’t need or read the paper statements.
How to Avoid It: Most banks offer the option to receive electronic statements instead of paper ones. You can log into your account settings and opt for paperless statements to avoid this fee. If you prefer receiving paper statements, some banks may offer them for free, so be sure to check with your bank.
Wire Transfer Fees
Wire transfers allow you to send money to another person’s account quickly, but they often come with a fee. The fee amount depends on whether the recipient’s bank is the same as yours or if the transfer is international. Additionally, some banks charge a fee for receiving wire transfers.
How to Avoid It?
Some banks may waive the wire transfer fee or offer a discount if you initiate the transfer online rather than with the help of a customer service representative. You could also consider alternative methods of sending money, such as using a paper check or a mobile payment app.
Account Closing Fees
Some banks impose a fee if you close your account within a certain time frame after opening it. This is often done to discourage customers from taking advantage of promotional offers and then quickly switching to another bank. Most banks charge this fee if you close your account within 180 days of opening it.
How to Avoid It?
Before opening an account, make sure the bank meets your long-term needs. If you decide the account isn’t right for you, try to keep it open past the cutoff period to avoid paying an account closure fee.
Dormancy Fees
A dormancy fee is charged when your account becomes inactive for an extended period. Banks typically wait at least six months of inactivity before charging this fee, but it’s important to stay aware of your account’s status.
How to Avoid It?
To avoid dormancy fees, consider making regular deposits or withdrawals from your account. You could also set up a recurring payment, such as a utility bill, to be paid from this account to keep it active. If you find that you no longer need the account, it may be better to close it to avoid dormancy fees.
Foreign Transaction Fees
If you make purchases while traveling abroad or buy items from an international merchant, you may be charged a foreign transaction fee. This fee is usually a small percentage of the total transaction amount.
How to Avoid It?
Not all banks charge foreign transaction fees, so if you frequently travel or shop internationally, consider opening an account with a bank that doesn’t charge these fees.
Lost Card Fees
If you lose or misplace your bank card, you may be charged a fee to replace it. Additionally, if you need the replacement card expedited, you might have to pay an extra fee for faster processing.
How to Avoid It?
Some banks may be willing to waive the replacement fee, especially if it’s your first time losing the card or if it was stolen. If the fee cannot be waived, you can save money by opting for standard processing and shipping times, rather than paying extra for expedited service.
Now that you know about the common fees for saving accounts, take a moment to review the charges your bank currently applies. If you’re looking for a new bank, make sure to ask about these fees before opening an account. By being aware of the different fees, you can potentially save money on bank charges and have more cash for you to enjoy life.
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