Junk fees may be draining your bank account. Here's how to fight back

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Ever noticed a charge on your bank account you don’t recognize? It may be a junk fee.

Junk fees can erode your bank account over time and impact your finances. These fees are often hidden or disguised as small charges but can add up quickly.

Junk fees are concealed charges attached to services or products. You can find these fees in most industries, from ticket sales to hotel stays — and banking is no exception. These fees are often undisclosed or vaguely explained to customers, resulting in unexpected costs.

Common banking junk fees include maintenance fees, overdraft fees, and ATM fees. While some fees may be legitimate, most junk fees are excessive and unjustified. They can range from a few dollars to considerable amounts, depending on the bank and transaction.

While it isn’t always easy to find these fees, there are steps you can take to steer clear of them. Here’s a guide to the most common junk fees and how to avoid paying them.

How much are you paying in junk fees?

How much you pay in junk fees depends on where you bank, what accounts you have, and what transactions you’re making.

Here’s the average cost of junk fees in 2023, based on a recent Bankrate survey.

• Out-of-network ATM fees: $4.73 
• Overdraft fees: $26.61
• Non-sufficient funds fee: $19.94
• Monthly fees for interest checking accounts: $15.33
• Monthly fees for non-interest checking accounts: $5.31

Keep in mind that some banks charge fees while others don’t. The way banks charge fees is also changing.

The average cost for using an out-of-network ATM is at a record high, while overdraft fees are at their lowest point in nearly two decades.

One thing is for certain: Junk fees harm your finances. These fees add little to no value, yet they can cost you hundreds of dollars annually. Consumers paid over $7.7 billion in overdraft and non-sufficient fund fees in 2022.

Junk fees can gradually erode your account balance over time. Although each fee may seem small, they can add up and have a major impact on your finances.

Types of junk fees in banking

There are many different types of junk fees, which can make it difficult to keep track. The most common ones you may come across include:

• Monthly maintenance fees: Banks often charge a monthly fee just to keep your account open. This applies to most accounts, including checking, savings, high-yield savings, and money market accounts.
• Overdraft fees: When you make a transaction and don't have enough money in your account, your bank may cover you and charge an overdraft fee. If the bank rejects the transaction, you may still get charged an insufficient funds fee.
• ATM fees: Many banks have extensive ATM networks where you can withdraw monthly for no fee. But you may pay a fee if you use an ATM not owned by your bank or in your bank’s network. Fees can apply to both cash withdrawals and balance inquiries.
• Wire transfer fees: Banks often charge fees for sending or receiving money via wire transfer. These fees can be significant, particularly for international wire transfers.
• Minimum balance fees: Some banks waive their monthly maintenance fee if you maintain a minimum balance.
• Paper statement fees: Some banks charge fees to send paper statements over electronic statements. This fee encourages customers to go paperless and receive their statements electronically.
• Foreign transaction fees: If you need access to your money while traveling abroad, your bank may charge a fee for making purchases.
• Inactivity fees: Certain banks may impose fees if an account remains inactive for a specific period. Inactivity fees encourage customers to maintain a minimum level of account activity.

These are just a few of the most common junk fees, but your bank may have others. Understanding your bank’s policies is the key to avoiding junk fees.

6 ways to avoid bank account fees

While junk fees are frustrating to deal with, the good news is that it’s possible to avoid them.

1. Research and compare different banks

Every bank has its own method of charging fees. Knowing what fees your bank charges and how much they charge is the best way to avoid paying fees in the first place.

You can find this information by visiting your bank’s website, calling customer service, or visiting a local branch. It’s often listed under “fees,” “pricing,” or “account terms.”

2. Choose a bank with no or low fees

Ideally, you want an account with as few fees as possible or no fees at all. Look for an account offering low or no monthly maintenance fees and minimal transaction charges.

Today’s best banks won’t charge fees — so it may be time to break up with your current bank.

Online banks often charge fewer fees than brick-and-mortar banks because they have lower overhead costs. If avoiding fees is your top priority, you may want to switch to an online bank.

While you won’t have access to a physical branch, many online banks allow you to deposit checks with your phone and access in-network ATMs.

3. Maintain the minimum monthly balance

Banks often charge monthly maintenance fees if your account balance falls below a certain minimum. By maintaining the required balance, you can avoid these fees.

Maintaining a minimum balance also helps you avoid costly overdraft charges. Keeping your balance above the minimum reduces the risk of overdrawing your account and incurring fees.

Some banks offer additional benefits to customers who maintain a balance. Perks include higher rates on savings accounts, reduced loan rates, or even waived fees for other banking services.

4. Use in-network ATMs

When you use an ATM outside your bank's network, you may face not one, but two fees: the fee imposed by the ATM owner and a fee charged by your bank.

These fees can add up quickly, especially if you frequently withdraw cash. To avoid these charges, use ATMs within your bank's network. Some banks may waive or reimburse you for ATM fees.

Most banks have a network of ATMs where withdrawals are fee-free for their customers. Or consider withdrawing cash from a retail store that offers a cash back option.

5. Set up account alerts

Most banks offer alerts that notify you about account activity, low balances, or upcoming payments.

In some situations, your balance might change without you realizing it. This is more likely to happen if you have auto-pay set up for a bill. If you’re not keeping a large cushion in your account, these recurring bills could trigger an overdraft.

Setting up notifications helps you stay proactive and avoid any fees associated with overdrafts or missed payments.

For example, you could set up an alert if your balance falls below a set dollar amount. That way, you can make a deposit before spending to be sure your account balance doesn’t fall below $0.

6. Ask for a fee waiver or reduction

Once a fee hits you’re account, you have to pay it, right? Not necessarily.

In some cases, you can get these fees waived or reversed by simply contacting customer service.

But it’s not guaranteed.

Try to make the best case for yourself, highlighting your loyalty to the bank and how many years you’ve been a customer. It won’t always work, but it’s usually worth a quick call to see if you can get the fee waived.

The bottom line

The way banks charge fees is changing. Bank of America was fined over $100M earlier this year for illegally charging junk fees. The Biden Administration is pushing a measure that would prevent companies from charging hidden fees. This would force sellers (including banks) to disclose all costs upfront.

Until legislation changes, you’ll have to monitor for junk fees yourself. By checking your bank statements, you can spot these fees and take action. Better yet, you can set yourself up so you avoid paying these fees in the first place.

While many of these fees may not seem like much, together, they can really eat away at your account balances together. Whether you want to build an emergency fund, save for a home, or grow your wealth, you’ll need cash to make that happen. The sooner you can keep more of your own money, the sooner you can achieve your financial goals. 

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