Bank Fees and What You Need to Know

All banks have fees. Some are large, some are small. Some are hidden, and some are just the coast of doing business. But no matter the fee, it's important to understand

Many of us are familiar with banks: They take our deposits and pay [tiny] dividends. They give us loans for cars, homes, and personal expenses, and then we pay interest to the bank. What we often forget are the fees. When not careful, these fees can quickly stack up and send our account to zero, or even negative. 

• Each bank is allowed to set their own fee amount, with no federal limit, and even minimal state limits.

• Some common fees that a bank will collect are ATM Fees, Non-Sufficient Funds (NSF), Returned Check fees, Overdraft Fees, Monthly Maintenance fees. Each having a different amount.

• Some services are provided that have regular fees or are pay-per-use (Overdraft Protection, Courtesy Pay, etc.). 

• At the bank's discretion, they can "forgive" certain fees and refund them to you, but typically anything over $100-$200 will require authorization above the Branch Manager.

Why do banks charge fees?

When bank representatives help you open an account, their job is to tell you everything you need to know about that account. Part of their job, as prescribed by law, is to provide you with a copy of all account-related fees, referred to as a "fee schedule". This fee schedule shows all their fees. So naturally we assume that the rep has some experience and has seen how often people pay some of these fees. If the rep isn't helping you understand the fees, or at least the most common fees, question them. 

How often will you have to pay bank fees? 

That depends on how closely you keep an eye on your account. For many people, it’s difficult to track their spending because the debit card makes it so intangible. Because we don’t have to physically handle the money, it's difficult to conceptualize how quickly we’re spending our money. If you're not careful, you may find your paying a lot of fees. Here is an example from the Consumer Financial Protection Bureau (CFPB), on how easy it is to fall victim to these fees: 

   - “Overdraft fees can price people out of banking” By Joe Valente, CFPB 

(*The excerpt above was edited from it’s original )

   You may be wondering why, in the example, they mentioned their transactions were in a “different order". You may have experienced this before and wondered why that happens. You can read more about it [here]. 

   Even when our friend in the example tried to be responsible and bring their account positive, they were still charged a fee. For some people, this is a regular occurrence, and then they feel forced to close their account because they can't always afford to pay all of it.

Common bank fees

   To be frank, the most common fees you'll have to pay are the Overdraft fee, the "non-sufficient funds" fee, and the monthly maintenance fee. 

   The overdraft fee is exactly what it sounds like. It's a fee you pay every time your account is charged, and the bank uses money from your savings account to help pay for the transaction.  This might not be cheap, and in most cases, it costs more than a tank of gas, so just sign over your 401(k) now. 

   The non-sufficient funds fee is a little more painful. If you attempt to make an electronic payment, or write a check, without enough money in the account, the bank will charge you a fee for not having enough money. This fee is typically even higher than the overdraft fee.

   The monthly maintenance fee is a fee charged by your bank just for the sake of having an account, whether it’s checking or savings. In most cases, this fee is only charged when your balance falls below a certain threshold. That threshold could be an average daily balance anywhere between $500-$1,500. The good news being that if you bank with a Credit Union, you likely won’t have a maintenance fee. In fact, my own credit union only requires a single penny in the account. One. Penny. 

  Any of these fees can quickly go from a "small fee" to a three-digit hole. That's why it’s important to keep a close on your account and know what's coming in and when everything is going out. 

  Even though you may never experience them all, banks have lots of fees. In fact, you may only ever have to deal with the examples from above. Still, it's important to understand all the fees that come with your banking service.