Published in: Banks | Jan. 25, 2019
By: Eric Volkman
American consumers of a certain age remember a glorious time when having a bank account was a low-maintenance, low-cost activity. We stashed a few bucks in the account, got a little slice of interest every now and again, and happily used the account for many of our financial needs.
This is almost never the case these days. Wafer-thin interest rates have made it difficult for banks to make money the traditional way, i.e. by taking in customer deposits and loaning out the funds. So they've shored up their revenue bases by imposing fees on a raft of different, oftentimes quite normal, banking activities.
There are a great many banking fees consumers are subject to these days. Here are three of the most consistently aggressive ones we often don't notice, with a few words on how to avoid them.
An overdraft fee kicks in if you try to spend more money that what is in an account. This is a classic bank staple going back many years.
Technically, it should no longer exist. A 2010 Federal Reserve law mandated banks to reject any transaction if the account lacks the sufficient funds for it.
Banks swerve around this by allowing their customers the "privilege" of opting in to what's called "overdraft protection." By opting in, you're basically permitting your lender to hit you with overdraft fees whenever the occasion warrants.
A typical overdraft fee is usually in the neighborhood of $35. This can get ruinous quickly, as every further instance of overdraft generates the same fee. So if you're on a shopping spree and are unaware that you don't have enough dosh in your account to support it, you could generate a series of these charges.
The good news is that the overdraft fee is easy to avoid -- simply don't opt in to overdraft protection. In the worst case your purchase will be declined when you try to swipe for it at the register. If that happens, just apologize and go on your way. Put off your purchase until the funds come into your account.
A little embarrassment is preferable to a $35 donation to your lender for doing nothing.
It's normal (and often acceptable) to pay for convenience. But do we have to pay so much for it?
Take the ATM fee. It's not unusual for banks to sock their customers for using an out-of-network ATM with their debit cards. This tends to hover around $3 per transaction.
Worse, the consumer usually gets socked by both sides of the action, with the host ATM network also charging a fee for using a non-native debit card. These are at least $1.50 to $3.50 per transaction, meaning that a simple cash withdrawal can easily generate $5 or so in bank fees.
That might not sound expensive, but consider that most ATM cash draws are only in the double digits -- $20 for some beer, $50 for walking-around cash, etc. In terms of percentage of the total, that $5 ends up being pricey. For that $20 you need to secure beer, you're effectively paying a fee of 25%.
Luckily, the world is moving away from cash transactions, so cash-only situations are becoming increasingly rare. If you absolutely cannot avoid them or are an old-fashioned paper money fan, consider using an account from an online-only bank as your go-to financing instrument. Often, such lenders reimburse some or all ATM fees generated at outside machines.
There are different terms for this charge -- it can also be called monthly maintenance, monthly fee, or go by various other names. Basically this is your bank dinging you a few bucks every month for… well, simply for having the account. Rarely do you receive extra services or perks for it.
On the positive side, the fee can be avoided if you meet certain requirements. Chiefly, these involve:
Minimum ongoing balance -- You'll need a certain amount of money in the account at all times.
Minimum deposit amount(s) -- You have a certain amount of money coming in monthly, usually required in the form of direct deposit (such as your employer's paycheck).
The annoying thing about either requirement is that it takes that much more attention and management to satisfy it. The best accounts are low-maintenance ones where we don't have to worry about being nickel-and-dimed to little advantage.
To avoid the account maintenance fee the banks' preferred way, you can be an active monitor and make sure you satisfy the requirements for getting the fee waived.
A better move is to seek out one of the admittedly rare accounts that doesn't impose a fee on you simply for being a customer. If that proves difficult or impossible, look for the lowest fees and/or easiest-to-monitor accounts from otherwise reputable lenders on the market.
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