How can you avoid a monthly maintenance fee? Guide to banking fee-free
If you’re not flush with cash, a monthly maintenance fee at your bank can feel like an unwelcome extra charge. This fee, also known as a service fee, is a regular charge some banks and credit unions apply for account upkeep.
It might seem unfair to pay to keep your money in a bank account, especially since banks earn interest on your deposits. But these fees help financial institutions cover their operating costs.
The good news is that monthly maintenance fees are often avoidable. Understanding what they are and why they exist is the first step toward keeping your money fee-free.
What is a monthly maintenance fee?
A bank’s monthly maintenance fee (also known as a monthly service fee) is what a financial institution charges customers to keep their money in a checking or savings account. Not all banks charge monthly maintenance fees; in fact, many banks offer options to avoid these fees by meeting certain requirements, such as maintaining a minimum balance or setting up direct deposit.
The problem is that if a bank wants you to keep, for instance, $1,500 in your account at all times, a common number that many financial institutions require to avoid a monthly maintenance fee, that may work fine for some households, but it may be an impossibility for others. A report from the Federal Reserve last year found that 37% of Americans would struggle to pay a $400 emergency if one came up. Monthly maintenance fees are just one example of the account fees customers may encounter with checking and savings accounts.
How much are monthly maintenance fees?
All banks are different, and not every bank has a monthly maintenance fee, but you’ll find them ranging from around $4.95 to $25, and when it’s a higher amount, that’s usually going to be a bank that wants you to keep a lot of money in the account. In other words, if you’re looking for a bank, you shouldn’t worry that you’re going to wind up with a checking account that charges you $25. A bank is typically going to have a variety of checking accounts, with varying fees. Some banks, especially online only banks, offer lower fees or even accounts with fewer fees compared to traditional banks, since they have lower overhead costs. For example, a basic checking account is often designed to have lower or no monthly maintenance fees, making it a good option for those seeking affordable, straightforward banking. Still, you may feel that any fee is too much.
But a bank that offers a $25 or more monthly fee for an account generally has the expectation that you will keep a lot of money parked there. For instance, the Bank of America Advantage Relationship Banking account has a $25 monthly maintenance fee. You can avoid paying it if you keep an average balance of $20,000 in the account, and it’s worth it to some to use the checking account because it pays a variable interest on balances.
Why do banks charge monthly service fees?
Understandably, nobody likes to pay a monthly maintenance fee, but banks are businesses, and like any company, they have a payroll to meet and other operating costs, like the building lease and the electric bill. These operating expenses are often referred to as overhead costs, which include maintaining physical branches. Because of these overhead costs, a bank or credit union may charge monthly maintenance fees to help cover its expenses and to make a profit.
It may seem greedy, and certainly some banks do seem to go overboard with their fees, but even if you don’t like them, you can probably see the logic behind charging a monthly maintenance fee. Both banks and credit unions may impose these fees, though their fee structures can differ depending on their operational models.
Historical context of fee implementation
Banks haven’t always charged monthly fees. It became a regular occurrence in the 1980s when the federal government began deregulating interest rates. The introduction of monthly maintenance fees was part of a broader trend of common bank fees and additional fees being implemented by banks. In 1984, the average monthly maintenance fee was $2.70, which sounds laughable today but, you know, inflation.
In 1988, Bank of America started charging ATM fees, setting off a trend, and, well, the banking industry hasn’t really looked back since.
But, again, monthly fee-free checking accounts still exist, just like they did back before 1980. You simply have to look a little harder to find them.
Strategies to avoid monthly maintenance fees
You don’t have to accept a monthly maintenance fee if you don’t want to.
First of all, most, if not all, banks offer ways to avoid the monthly maintenance fees, as we’ve noted. Generally, that’s by following one of two rules:
- Keep the minimum amount of money in your bank account that your bank requires, such as meeting the minimum daily balance, minimum balance required, or minimum balance requirement, to avoid the fee.
- Set up direct deposit, so you have your paychecks going directly into your checking account. Often, banks require monthly direct deposits or a qualifying direct deposit of a certain amount during the statement period to waive the fee. So a direct deposit of $200 may not cut it. But generally, if you have a couple of paychecks heading into the account every month, you can probably bypass a monthly maintenance fee.
If that isn’t feasible, there are other strategies you can try.
Rakesh Gupta, an associate professor in the Robert B. Willumstad School of Business at Adelphi University, in Garden City, New York, has been teaching students for some time about financial ins and outs, and he says that there are a number of ways customers can avoid monthly account maintenance fees. He suggests the following.
- First, research monthly maintenance fees. “Do your homework,” Gupta says, something he probably says to his students a lot, but he is also telling any banking customer to do. “Do a comparison check on fees with various banks, including credit unions and online banks, as to their maintenance fees waiver requirements.” Make sure to check if credit unions offer digital banking and online banking features, as well as if they provide fee-free or low-fee accounts. Sure, all of the research in the world won’t lower or eliminate a banking fee, but you need to start somewhere. It may help to know whether you’re paying a reasonable fee or not, and if there are other banks you might like to join that don’t charge customers monthly fees.
- Talk to your bank teller or manager. If you’re sighing and thinking, “I don’t want to do bank homework,” Gupta says that you could skip the homework and call or drop into your bank and ask them to waive the monthly maintenance fees. “If you are a long-time customer, they may simply do it,” he says.
- Combine your accounts. That is, if you have a lot of accounts at the same bank, this may help you. “If you have multiple accounts, such as checking, savings, credit card, mortgage, auto loan, etc, ask if they can be linked. The total balance across eligible accounts or other eligible accounts may then be sufficient to waive the fee,” Gupta says.
- Ask about special exceptions to bank fees. Banks have special rules for some categories of customers, like seniors, students and veterans, says Gupta. Some banks automatically waive fees for these groups, so it’s important to understand your bank’s rules. Maybe you’ll get lucky and fall into an eligible bucket, in which you, too, can get your fee waived.
- Threaten to check out the competition. If your bank still won’t budge on the fees, Gupta suggests telling them that you will move your business to a bank that doesn’t charge fees. Maybe the bank manager will suddenly find a way to waive or reduce your bank fee.
- Find a bank with no monthly maintenance charges. Gupta says that if your bank simply won’t budge on maintenance fees, you may just have to change banks. He also says that many financial institutions, especially credit unions and online banks, offer no-fee accounts. Credit unions offer a variety of low-cost accounts and digital banking options, while online banks provide online banking services that can help you avoid monthly fees.
Link multiple accounts to reach combined balance requirements
If you have other accounts with your bank—such as a savings account, money market account, retirement accounts like an IRA or a CD, investment accounts, or other eligible accounts—you may be able to link these to your checking account. By combining balances across these accounts, you can meet the minimum balance requirement to waive the monthly maintenance fee on your checking account.
This means you could potentially keep a low or even zero balance in your checking account while avoiding fees, as the bank considers the total funds you hold with them. This arrangement benefits both you and the bank, as it encourages consolidating your finances within one institution while helping you minimize account fees.
Bottom line on monthly maintenance bank fees
If you’re paying a bank a monthly maintenance fee, you owe it to yourself to try to avoid paying it. Ask your bank if they can waive fees for you, and be sure to check for other fees that may apply, such as overdraft or ATM charges. That said, switching banks isn’t easy, and so if you can find a way to stay and nevertheless have the fee waived, that may be the ideal scenario, unless you’re generally unhappy and want to leave.
And, sure, banks have operating costs and financial obligations, but so do you, and there are plenty of financial institutions that want your business and will not charge you for it.
Frequently asked questions about monthly maintenance fees
The two most common methods that banks offer, allowing customers to waive monthly maintenance fees, are maintaining the required minimum balance (typically $500-$1,500 depending on the bank) and setting up qualifying direct deposits to your account (usually $250-$1,000 per month).
To stop a monthly maintenance fee, you’ll want to research your bank’s specific fee waiver requirements and implement one of the qualifying activities, such as setting up direct deposit, maintaining minimum balances, or meeting transaction requirements. Your bank’s customer service representatives can guide you if you’re having trouble. If you’re unable to meet these requirements, consider calling your bank to negotiate a waiver or switching to a no-fee account option.
No, not every bank charges monthly maintenance fees. In fact, many online banks, credit unions, and some traditional banks offer checking and savings accounts with no monthly fees regardless of balance or activity. However, these accounts may have other limitations or requirements.
An overdraft fee is charged when you spend more than your available bank account balance and the bank covers the transaction. Overdraft fees can be significant, but you can avoid them by monitoring your balance, setting up balance alerts, or enrolling in overdraft protection.
Insufficient funds means your account does not have enough money to cover a transaction. When this happens, the bank may decline the transaction and charge an insufficient funds fee (also called an NSF fee). To prevent insufficient funds fees, keep track of your bank account balance and set up balance alerts.
Balance alerts are notifications you can set up through your bank’s mobile app or online banking. They notify you when your bank account balance drops below a certain amount, helping you avoid overdraft fees and insufficient funds fees.
Overdraft protection is a service that links your checking account to another account, such as a savings account or line of credit. If you have insufficient funds, the bank will automatically transfer money to cover the transaction, helping you avoid overdraft fees.
A wire transfer is a method of electronically sending money from one bank account to another, often used for large or international transactions. Banks typically charge a wire transfer fee for this service, and international wire transfer fees can be higher. To avoid or minimize wire transfer fees, compare banks’ fee structures or consider alternative transfer methods.
ATM fees can be charged by both your bank and the ATM operator if you use an ATM outside your bank’s network. To avoid these fees, use ATMs within your bank’s network, which you can locate using your bank’s mobile app.
Many banks limit the number of free withdrawals you can make each month, especially from savings accounts. To maximize free withdrawals, use your bank’s network ATMs and keep track of your monthly transactions to avoid excessive transaction fees.
A bank’s mobile app can help you locate in-network ATMs, set up balance alerts, monitor your bank account balance, and manage transactions, all of which can help you avoid unnecessary fees.
An excessive transaction fee is charged when you exceed the allowed number of withdrawals or transfers from certain accounts, like savings accounts, in a month. To avoid this fee, limit your transactions or choose an account type with more flexible terms.
An early account closing fee is charged if you close your account within a certain period after opening (often 60-180 days). To avoid this fee, keep your account open for at least the minimum required time specified by your bank.
Ally Bank is known for its no monthly maintenance fees, no minimum balance requirements, and a large ATM network with free withdrawals. They also reimburse some out-of-network ATM fees, making it a fee-friendly option.
Banks charge monthly maintenance fees to cover the costs of account management and services. These fees can often be waived by meeting certain requirements, such as maintaining a minimum balance or setting up direct deposit.
Credit unions are member-owned financial institutions that often offer lower fees, higher interest rates, and more free withdrawals compared to traditional banks. Many credit unions provide checking and savings accounts with no monthly maintenance fees and special benefits for members.
