6 Little Bank Fees Eating Away Your Money Without You Noticing

Bank fees can eat away a substantial portion of your checking and savings accounts bit by bit if you're not careful.
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Over time, even a seemingly harmless trickle of water can wear away a tremendous amount of earth, or even carve deep gashes into solid rock. Bank fees can do the same thing to your account balances if you’re not vigilant. Drip, drip, drip – each fee small enough that you decide to let it go, but after a while you find they have eroded away significant amounts of your money.

Here are six fees that could be eating away at your bank accounts without you noticing:

1. Monthly checking account maintenance fees

These are charges just for having a checking account. At an average of $13.09 in the latest MoneyRates Bank Fees Survey, these monthly bank fees add up to just over $157 a year. Three-quarters of all checking accounts now charge these fees, so avoiding them is difficult – but not impossible.

If you are looking for one of the banks with no fees, search for institutions offering online savings or checking accounts. Also, some banks will waive the monthly fee if you have direct deposit or maintain a specified minimum balance.

2. Overdraft fees

Overdraft fees now average $32.44 per occurrence, so if you have a few transactions once you overdraft your account you could pay a multiple of that figure. On top of that, banks often charge an additional fee for each day the account maintains a negative balance. By law, banks now have to assume new customers don’t want overdraft protection, but since these fees are a huge profit center for them, they actively encourage people to opt in. Do yourself a favor, and don’t agree to accept this very expensive checking account feature.

3. Statement fees

You might have thought that simply having an account entitled you to regular statements. But in an effort to save printing and mailing costs, some banks are now charging for those statements.

These fees are usually just a couple dollars, but you can avoid them if you are willing to view account statements online, or if you find a bank with no fees for monthly statements.

4. Out-of-network ATM fees

If you use your own bank’s ATM or one that is part of a network to which your bank belongs, you usually will not be charged a fee. However, if you use an out-of-network ATM, you could pay two types of fees for this convenience. The bank that owns the ATM may charge non-customers a fee, and these average $2.69 per transaction.

In addition to that, your own bank might charge you for using another bank’s ATM, and these fees average $1.61 per occurrence. Combined then, using an out of network ATM costs an average of $4.30, so when you choose a bank check to see that they have a network of machines convenient to your regular travels.

5. Currency exchange charges

Banks will often exchange foreign currencies at their branches, but for a fee. With any per-occurrence fee, the key is to consolidate transactions to minimize the number of fees you pay. So, think ahead so you can combine your upcoming needs into a single transaction rather than paying for a series of smaller currency exchanges.

If you are going to be traveling with friends or family members, have everyone pool their money to be exchanged into one transaction rather than each of you paying a separate fee. The galling thing about paying a fee for currency exchange is that banks also make money on these transactions by providing a less-than-favorable exchange rate.

6. Foreign transaction fees

Besides charging you to exchange currency at the branch, banks also often charge an additional fee if you use your credit or debit card in a foreign country. To minimize these fees, try paying for as many small transactions as possible in cash rather than via a credit or debit card.

Don’t ignore that dripping sound. While each occurrence may seem harmless, they come in enough forms and happen frequently enough that they can seriously erode your hard-earned savings.

Frequently Asked Questions

Q: My question about banking is pretty basic. Why do banks pay interest on savings accounts, but then charge you fees on checking accounts?

A: First of all, some banks do charge a fee for savings accounts, especially if you slip below a certain minimum balance. So, possible fees are something to watch out for when choosing a savings account, especially if you are making a relatively small deposit.

With that being said, it is true that checking accounts are more likely to charge a fee than savings accounts. The reason is that checking accounts are designed to be transactional. Between checks and debit card charges, checking accounts can have dozens of transactions per month. In savings accounts, access is more limited so as to keep the number of transactions down.

This difference in transaction volume affects the banks in two ways, both of which influence the likelihood of an account charging a fee. For one thing, it costs money for banks to process transactions, so checking accounts tend to be more expensive to handle than savings accounts. For another thing, since people tend to leave money in savings accounts for a long time without touching it, banks are able to put that money to use in the meantime. This has an economic benefit to the bank that helps offset the cost of handling the account.

That economic benefit has been diminished lately by a weak lending and investment environment. This is one reason savings account rates are so low today. So, while you may not be paying a fee on your savings account, the fact that savings account rates are below inflation means you are effectively paying a price to keep your money at the bank.

Besides the fact that banks are not making as much money today, another reason why savings account rates are so low is that banks do not have a strong incentive to offer higher rates to attract deposits. There is actually a glut of deposits these days, and with the federal funds rate at 0.08 percent, banks do not lack for a source of low-cost funds.

Checking and savings accounts do have one thing in common: They could both benefit from an improved economy. In recent years, fees on checking accounts have been rising while interest rates on savings accounts have been falling — a lose-lose situation for consumers. What could turn this around is a sustained period of economic improvement. This would give banks more profitable ways to use deposits in savings accounts, and thus a reason to pay more interest. In turn, profitable relationships can help subsidize checking accounts, so a stronger economy would take some of the pressure off those fees.

More from MoneyRates.com:

Avoiding checking account fees

Should I deposit more to avoid a statement fee?

Are pre-paid cards a good alternative to checking accounts to avoid rising fees?

Are pre-paid cards a good alternative to checking accounts to avoid rising fees?

Richard Barrington has been a Senior Financial Analyst for MoneyRates. He has appeared on Fox Business News and NPR, and has been quoted by the Wall Street Journal, the New York Times, USA Today, CNBC and many other publications. Richard has over 30 years of experience in financial services. He has earned the Chartered Financial Analyst (CFA) designation from the Association of Investment Management and Research (now the “CFA Institute”).