There are many personal finance tenets to follow when you decide to take control of your finances. Perhaps one of the most important is this: Don’t pay fees unless absolutely necessary.
The average cost of checking account fees over a decade totals almost $1,000, according to a recent study. But many of these fees — including common ones such as maintenance, ATM and overdraft fees — can be avoided by choosing the right bank and cultivating good banking habits.
Here’s what you should know about common bank fees and tips for avoiding them, including options for low-fee checking accounts that also earn interest.
1. Maintenance fees
Many traditional banks charge a maintenance, or service, fee on checking accounts — about $10 to $12 per month.
Some banks will waive the charge if you keep a daily minimum balance or have a certain amount of money deposited directly into your account each month. Others require a certain number of debit card transactions each month for the waiver.
Check your bank’s policy for exact terms so that you can set up direct deposit and keep the minimum required balance to avoid maintenance fees. If you can’t meet the requirements, look for a bank without these fees.
2. ATM fees
You’ve probably had the experience of needing cash and looking unsuccessfully for an ATM affiliated with your bank. You ended up with no choice but to go, cringing, to another ATM, resigned to paying a fee to your bank and possibly another to the ATM’s operator. Such fees average $2.01 and $2.75, respectively, according to the study.
ATM fees can be avoided by using your own bank ATM. That may require choosing a bank whose ATMs are easily accessible from your home or workplace, or looking for local bank branches and ATMs when you are out and about. You could also get cash back when making debit card purchases at many retail locations, eliminating the need for a trip to the ATM.
3. Overdraft fees
Your bank may charge you an overdraft fee if your withdrawals and transactions total more than the balance in your checking account. Most large U.S. banks charge at least $35 per overdraft, according to a recent Pew study. if you don’t correct the negative balance in a certain amount of time, you could get hit with an extended overdraft fee — that median is $20, the study said.
Consumers average about two overdrafts per year. But these fees are avoidable. The obvious solution is to avoid spending more money than you have in your account. You can also choose to have your transactions declined by the bank if your funds are insufficient.
If you opted into your bank’s overdraft program, which will carry a fee when you exceed your account balance, talk to customer service about opting out. Then keep a close eye on your bank balance, and use a credit card or cash to avoid overdraft fees.
Use an online-only bank or credit union
You can optimize your finances more by using an online-only bank or credit union. Online financial institutions have fewer overhead costs than traditional banks, so they are typically able to offer free checking accounts with higher interest rates and no maintenance fees. They typically don’t have their own ATMs but tend to be part of a network of fee-free ATMs that are widely accessible, especially in larger cities.
If you regularly have to deposit cash or like to visit a branch, try brick-and-mortar credit unions, which usually have lower fees and higher interest rates than big banks. Credit union membership may be restricted to residents of certain geographical areas or workers at qualified employers, but you may be able to join by making a donation of $5 to $10. That’s generally less than one month’s service fee at a big bank, so it’s worth the investment.