We all have a few pesky fees we’re used to paying, but plenty of other banking costs can be difficult to track down.
Banks are for-profit businesses and need money to earn profits. They make this revenue through a variety of ways, including bank fees.
Monthly Maintenance Fee
Whether it’s a fee for using an ATM or an overdraft fee, many bank fees can take a chunk out of your savings. To ensure you don’t pay more than necessary, it’s essential to understand the hidden costs of banking to avoid them.
A common way to avoid monthly maintenance fees is by meeting the minimum balance requirement for the account. This varies by bank, but it may be a minimum daily amount or an average over the statement period.
Some banks also waive monthly maintenance fees for customers who meet specific age requirements or are loyal to the bank. These can include college students, young adults, and elderly individuals.
Depending on the bank, you can get hit with an overdraft fee each time you make a transaction that exceeds your balance. These fees can add up quickly, so it’s essential to take steps to avoid them.
Several banks offer overdraft protection options, including automatic declines and a grace period before charges occur. Some even let you link your savings account so that any amount not covered by your checking account will automatically be transferred into your savings account.
So, why they charge fees in the first place? Banks make money by charging fees for their goods and services in order to cover their operating costs. They incur costs for everything, including paying the employee who answers the phone at the bank and keeping the lights on in brick-and-mortar locations, and they pass those costs along to the customer.
However, overdrafts aren’t just an inconvenience — they can also negatively impact your credit. They’re one of the oldest and most common fees associated with banking, but they’re also one of the easiest to avoid.
Late Payment Fee
One of the most common bank fees consumers face is the late payment fee. This charge is assessed on any credit card or loan past due by more than a day.
This is a frustrating charge because it takes away money from your account when you need it most. It’s also unfair for banks to take advantage of their customers.
Before opening a new bank account, it’s essential to understand the fee structure. This information can be found on your bank’s website and in the fine print of any agreements or pamphlets.
If you open an account with a bank or other financial institution and don’t use it for a while, you may be charged an inactivity fee. These fees, also known as dormancy fees, allow banks to recover the costs of maintaining inactive accounts.
Inactivity fees can apply to various accounts, including checking and savings accounts, brokerage and trading accounts, and even credit cards. They’re typically charged for bills that don’t receive a deposit or withdrawal in a certain period.
If you don’t want to pay an inactivity fee, keep your account active by making a few monthly transactions. You can do this by setting up a direct deposit, automatic payment, or recurring transfer into or out of your account.
Banks must make money, charging fees for everything from account set-up to maintenance and minor transactions.
The hidden costs of banking can be huge and can eat up hundreds of dollars a year. But there are ways to avoid them.
One of the most common is a transfer fee, which banks charge to move money from one account to another. This type of fee is not only a pain but can also reduce the value of your assets.