Education Saves You Money
Pat Nowak
Banks make their money by charging fees to account holders. In 2015, 628 banks, subject, to the new reporting rules revealed that they made more than $11 billion in overdraft and nonsufficient funds fees, accounting for 8% of their total net income. The Consumer Financial Protection Bureau continues to look closely at overdraft fees, but it’s up to you to know which bank fees can leave the biggest hole in your wallet, and how best to avoid them.
Overdraft Fees
When you initiate a transaction that requires more money than what’s in your account, your bank may float you a loan to cover it. But you’ll pay dearly for this convenience. The granddaddy of bank fees, overdraft fees cost a median $35 a pop.
• Opt out. You’re not required to participate in any sort of overdraft program. This way, you’ll simply be denied when you try to initiate a point-of-sale or ATM transaction that overdraws your account. Beware that you still may have to pay a nonsufficient funds fee on check transactions or certain recurring transactions such as automatic bill pay.
• Choose overdraft transfers. Overdraft transfers let you link a second account, such as savings or a line of credit, to your checking account. Then, the next time you overdraw your account, the bank covers your request with funds from the linked account.
• Police your spending more carefully. Ideally, you’ll keep enough of a cushion in your checking account to avoid worrying about overdraft fees, but this might not be realistic for everyone. Make sure you take advantage of customizable account alerts. Practically every major bank will let you receive an alert when your account balance dips below a designated amount.
Account maintenance fees
This vague monthly fee exists to cover administrative costs on your account. Maintenance fees average $13.00 a month. It’s easy to avoid monthly maintenance fees if you do your homework:
• Find a free checking account. Free checking accounts do still exist. Nearly one in four checking accounts are are still maintenance-fee free.
• See whether you can get the fee waived. Many banks offer several ways for customers to avoid the monthly maintenance fee. For instance, some banks waive fees for customers who (1) make direct deposits of $500 or more, (2) keep a minimum daily balance of $1,500 or more, or (3) average a balance of $5,000 or more across certain accounts.
ATM fees
Since they’re low-dollar, ATM fees may seem innocent enough. But if you find yourself using non-network ATMs often, a few dollars here and there can add up quickly. If you want to avoid shelling out a $5 fee next time you need a quick $50 or $60, here are some common-sense strategies that will help minimize ATM fees:
• Go with a bank that reimburses ATM fees. Some banks (many of them online) do this as a matter of practice in order to attract business. Other banks may offer this perk on higher-level checking accounts that require you to carry a heftier balance to avoid the fees. Use your bank’s branch/ATM locator. Every major bank has one of these on their homepage and mobile app. Use it. There’s no sense paying out-of-network fees when your bank has an ATM you didn’t know about just around the corner.
•Cut down on ATM use. Right? If you find yourself hitting an out-of-network ATM a couple times a week for small amounts, withdraw a larger amount once a week instead. Better yet, get cash back at a store register when you’re making a purchase. Just make sure the store doesn’t charge any fees for the service first.
