My years spent working at a bank gave me the opportunity to talk with people in all different financial situations. It also gave me the opportunity to recognize all the different ways that people work against their financial plans (or lack thereof) by being in incorrect accounts, paying multiple fees, and not completely understanding products they were using.
This isn’t just millennials either. In fact, due to millennials being more likely to be online, use paperless products, and utilize features like direct deposit, they were often paying fewer fees than some of the other customers that I worked with. Regardless of the demographic, the common problem was that many people just lacked knowledge of banking products and features.
When it comes to common banking fees, most are avoidable. Here are some of the most common fees that I saw, and my recommendation on how to avoid it altogether.
1. Overdraft Fees
Depending on how your bank handles overdraft fees, this can be one of the costliest fees that you will encounter. It also becomes one of the fees that can snowball on you very quickly as each transaction when your account balance is negative triggers the fee. Most banks charge anywhere from $25 to $35 per transaction. What makes it worse, is when this happens and your account is negative for several days, most banks will charge an ‘Extended Overdraft Fee’.Be mindful of your account balance at all times. Some banks offer text message alerts that you can set up to notify you when your account balance reaches certain limits. You may also be able to choose how certain transactions will take place if a purchase were to overdraft your account. For example, if I were to use my debit card and there was not sufficient funds in my account, the transaction is set to decline. My $6 purchase does not need to all of a sudden be a $40 purchase because of an overdraft fee!
2. ATM Fees
There are very few occasions you will find me with cash in hand. I know there are several financial bloggers who say that by using cash, they are better able to manage their spending, but I am definitely not one of those. In fact, due to how my rewards on my credit cards work, I never use cash for transactions unless I absolutely have to. However, to those who do use cash often, plan your purchases at the beginning of your month when you set your budget for the month.
3. Account ‘Maintenance’ Fees
Having the right type of account is incredibly important when it comes to choosing a bank. Paying somebody to hold your money so they can make money with it makes no sense, so why pay a bank to hold your money? Make sure you understand the type of account that you have and how to keep it free. If a bank wants to charge you a monthly fee to have an account, it’s not worth it in my opinion. The convenience of online banking, debit cards, and FDIC coverage will be free for you somewhere.Oftentimes, you can keep a checking account free by performing some activity throughout the monthly statement cycle. I have seen everything from having a direct deposit set up to the account to accepting paperless statements to keep free accounts. I personally have my retirement account being the qualifier for my free checking at my bank. Find what can keep your account free or find another bank!
4. Credit Card Interest
Sometimes paying interest on credit card balances is done because you have no other choice. If your car breaks down at the same time that you have a medical emergency, having a credit card can really save you. However, there seems to be a misconception that you must carry a balance to have a good credit score. I have paid exactly zero interest in my life on a credit card and have a credit score of 836 on my most recent statement.
I’ll discuss credit in a future post, but the point is that if you can pay your balance in full each month, you can build your credit score and pay zero interest as well. Whatever you do, do not miss a payment. Even missing one payment can throw your credit card into a ‘Penalty APR’ phase where you’re paying as much as 29.99% interest on your balance.
5. Foreign Transaction Fees
If you’re the travelling type, make sure you have an account that works with your style. Many debit and credit cards will have a foreign transaction fee that has a base rate plus a percent of the transaction. This can make your vacation expenses rack up tremendously if you aren’t careful. Just like with the ATM Fees, my advice would be to try and plan ahead the best that you can. If you know you’re going to be travelling soon, withdraw enough cash so that you can pay for your purchase that way or find a card that doesn’t charge foreign transaction fees.
Some banks will even transfer your currency for you ahead of time at no cost. The caveat is that you must give the bank anywhere from seven to ten business days to receive the different currency.
6. Statement Fees
There are many life events that require you to have a bank statement for proof of address or income verification and most of the time the bank statement will work for this. Most banks charge a fee for them to print a copy of your statement for you. If you are needing two years of statements for a mortgage broker or state department, this can quickly cost you an arm and a leg.Utilize online banking and consider printing the statements at home or work. If you don’t have a printer that you’re able to use for personal documents, consider going to the local library. You still may have to pay for the print, but it will likely be much cheaper than your bank printing it for you. Just be sure that if you’re logging into your bank account from a public computer, that you clear your browsing history, do not save the password, and completely log out when you’re done.
7. Human Interaction Fee
This sounds as ridiculous as the fee itself is. Some banks have created accounts that allow you to do all your transactions in a free account, so long as you don’t have to interact with a human. This works for some people, especially if you just set up direct deposit and spend your money without needing a teller or banker. However, in the event that your account has fraud, the last thing you probably want to do is pay a fee for the bank to fix something that shouldn’t have happened in the first place. I would simply find a new bank if you’re in this situation. There’s no reason to be charged for this when there are plenty of banks / credit unions that will allow you to talk with a bank employee without getting any fees.
Ultimately, it comes down to being responsible with your financial choices and preparing each month. There isn’t a perfect bank that will fit everybody’s financial situation. Understand how you’re used to transacting your money each month and find a financial institution that works with you. If you ever do get a fee, visit a nearby branch and speak with a banker. If you’re unsure of how you received the fee, ask for an explanation. Sometimes, bank employees will be able to waive fees, especially if you’re showing a genuine effort to avoid the fee to begin with. If all else fails, just flat out ask for the fee to be refunded. The worst thing that will happen is the employee will say that they can’t.
Are you getting fees at your bank? How have you managed to keep your banking fees to a minimum? Let us know on Twitter and Facebook so that we can help you find a way to avoid paying it again in the future!