Battle Bank Fees

Banks love fees. Want to wire money? Need to pay a fee. What to stop a check? Need to pay a fee. Need to use the bathroom? Gotcha!

Banks earn billions of dollars each year on fees. At first, they snacked on fees. They let business go as usual and accepted whatever fees arose out of errant customer behavior. Eventually, they came to rely on these fees and shaped their own processes and protocols to maximize fees. Remember how banks started cashing checks in order of size, rather than some other, more reasonable, method like the order in which they came in? By cashing the larger checks first, they increased the probability of an overdraft (cha-ching!). An overdraft meant fees! Fortunately, the government has pushed back on that sort of behavior but fees still remain and they still punish customers to the tune of hundreds of billions.

As part of my Foundation series covering the Basics of Banking,, I uncovered a lot of interesting information about banks and the banking industry including how insidious bank fees were. Here’s a list of the three most common bank fees and how you can easily avoid them.

Overdraft fees: An overdraft fee is charged when you make a financial commitment (a check or debit card charge) you can’t fulfill. When you write a check for more than the amount you have in the bank, you’ll get charged an overdraft of insufficient funds fee. Do it more than once and the fees get larger each time. These fees are the easiest to avoid because they’re the result of carelessness, you need to keep close tabs on how much is in your account. At the back of your checkbook there should be a “check register,” a little pad you can use to record transactions and maintain an accurate checkbook. By keeping an up to date check register, including debit transactions, you can practically prevent these fees from happening.

ATM fees: Whenever you use an ATM that isn’t affiliate with your bank, you will get charged ATM fees. First, the ATM owner will charge you a fee. Then, your bank may charge you a fee. Some banks will refund you these fees if you satisfy certain conditions, like a direct deposit or a minimum balance. If you find yourself paying these fees often, I’d switch to a bank that offers to refund these fees.

Minimum balance fees: Many “free checking” accounts will have a minimum daily balance requirement. If you fail, even for just one minute, to have a daily balance above this minimum, they’ll hit you with an “administrative” or minimum balance fee. To avoid this, just avoid all accounts with this requirement. There are plenty of banks that offer free checking without a minimum balance requirement and you should never subject yourself to that requirement.

If you are charged a fee, try to ask for it to be waived. If you do happen to make a mistake, it never hurts to play nice and ask them to waive the fee. Many banks have policies where they are willing to waive your first transgression (how nice!). If you have multiple overdrafts, you might be able to work it down to one, the first. It never hurts to ask and it can save you a bundle.

As a consumer, I think these bank fees are unfairly punitive and much higher than what the bank pays to handle them. As a taxpayer and unwilling investor in many of the banks in America, I think maybe these bank fees aren’t high enough! What’s the worst fee you’ve ever been dinged for?

Jim writes about personal finance at his personal finance blog, Bargaineering.

(Photo: mexifelio)