What Are Junk Fees and Is Your Bank Charging Them?

When you put money in the bank, you hope the cash will be kept safe so you can use it to pay off credit cards and other bills or accomplish financial goals. Unfortunately, sometimes this doesn't happen. Sometimes your bank can actually take some of your money in the form of junk fees.

The Biden Administration has been on a crusade to eliminate these unnecessary costs. And it's had some success in the banking sector. But this doesn't mean everyone is free of unnecessary surprise expenses from their banks.

Here's what you should look out for to determine if your personal finances are being affected by junk fees.

What junk fees do banks charge?

Junk fees are unexpected, often hidden, costs that can take money out of your pocket. Banks have notoriously been guilty of charging a lot of them, including:

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• Account maintenance fees
• Overdraft fees
• ATM fees
• Fees for lost or misplaced debit cards
• Bounced check fees if you write a check to someone and don't have enough money in your account
• Fees for depositing a check that bounces that someone else writes to you
• Non-sufficient funds (NSF) fees
• Foreign transaction fees

The funds lost due to these junk fees is significant. In fact, the Consumer Financial Protection Bureau found that the average cost of overdraft or non-sufficient funds fees was between $30 and $35 in 2019. During that year, banks made $15 billion from these fees, which are charged when you try to take too much out of your account and your balance goes negative.

The White House has been making a major effort to eliminate these fees, and it has had success with some of the more common bank fees. For example, in 2021, when the CFPB increased oversight on banking practices, 15 out of 20 large banks stopped charging bounced check fees. 

The CFPB has also released guidelines that banks need to follow. This prevents surprise overdraft fees that are charged when it looks like you have money in your account when you make a purchase, but you get hit with fees because there's not sufficient funds by the time the purchase clears. And, the CFPB stopped "surprise depositor fees" as well, which are charged if you deposit a check someone wrote you that bounces. 

The CFPB's action on these fees can help cut consumer costs by $1 billion. But, it doesn't mean all fees have disappeared from all financial institutions. 

Is your bank charging you junk fees?

To find out if your bank is charging you unnecessarily, take a close look at your account terms and conditions. You can usually find a summary of account fees by signing into your online account or checking the financial institution's product guides. You can also check your bank statements to see if you've been charged anything unexpected.

If you have been hit with fees, it may be time to switch banks so you don't keep losing your hard-earned cash. Check out this list of the best checking accounts to find a good place to keep your money. Follow that up with our list of the best savings accounts, too. Read the details carefully to ensure you're picking a financial institution that's not going to make your financial situation worse.