12 Most Common Types of Bank Fees and Tips to Avoid Them

Numerous small bank fees can easily go unnoticed, quietly eating into your savings. 

Whether you manage personal finances or run a business, banking often involves intricate fees, such as transaction charges or monthly maintenance costs. 

Understanding how your bank collects fees, minimizing them through various strategies, and exploring alternative banking options are essential steps in optimizing your financial management.

This guide outlines 12 common bank fees and strategies to minimize their impact on your savings.

The monthly service fee is what banks charge to maintain your account with them.

This is the most common type of fee charged to your checking or savings account, and it is typically withdrawn from your account every month.

Many banks waive this fee if you maintain a specified minimum monthly balance in your account. Some banks waive the entire fee unconditionally to remain competitive.

The average monthly fee is USD 5 to USD 25. The minimum balance to waive it varies widely, usually from USD 250 to USD 5,000, depending on the bank and account features.

• Maintain the required minimum balance to waive the fee.
• Some banks waive savings account fees if you open a checking account with them.
• Consider online banks, neobanks, or credit unions, which often have lower fees or no monthly fees. 
• For a small business, seek an account tailored for small businesses or one with a small community bank, as the required minimum balance is likely not high.
• Negotiate with your bank based on your banking history and estimated transaction volumes.

Transfer fees are charges imposed by banks when you transfer money from one account to another, whether domestically or internationally. This can apply to any type of transfer, such as wire transfers, telegraphic transfers (TT), SWIFT transfers, and more.

These fees can be a fixed amount or a percentage of the transferred sum. 

Local transfers often have waived fees, but this varies depending on your bank or financial institution. 

• Look for fee waivers. Many financial institutions provide a limited number of free transfers each month. Some banks offer free transfers if the transfers are made via online banking or mobile apps.
• Explore transfer methods; for instance, ACH transfers are cheaper than wire transfers, and BACS transfers are cheaper than CHAPS. However, cheaper options are slower.
• If your transaction volume is high, try using it to negotiate lower fees with your provider.

International transaction fees apply to any financial transaction made abroad. This includes sending or receiving international wire transfers, using a debit or credit card abroad, making transactions at foreign ATMs, purchasing items from foreign merchants, and more.

International transaction fees often include:

• Foreign Transaction Fee: This applies when you use your card or account outside your home country.
• Currency Conversion Fee: This applies when converting foreign currency to your local currency and vice versa.

The amount charged is usually a % of the total amount of the transaction, generally from 1% to 3%.

Choose accounts and credit cards that don’t charge fees for international transactions. While it might seem rare, there are options available, especially with credit cards aimed at frequent travelers. Those travel-friendly cards often waive foreign transaction fees in exchange for an annual fee. If you travel frequently, the savings from avoiding international fees can justify the annual cost.

Another solution is to use international money transfer apps that offer competitive pricing and FX services. 

An overdraft fee is incurred when you spend more money than is available in your account. This can happen with debit card purchases, ATM withdrawals, or checks. 

Essentially, if a transaction exceeds your account balance, the bank covers the shortfall so you can complete the transaction, resulting in a negative balance and a fee.

An authorized overdraft is when a fee is charged as per the agreed-upon overdraft service.

On the other hand, an unauthorized overdraft fee is when you enter into an unplanned or unarranged overdraft by spending more than you have in your account without a prior agreement with your bank.

• Set up low-balance alerts to notify you when your account balance drops below a specified threshold. This will help you stay aware of your available funds and prevent accidental transactions that exceed your balance.
• Link your checking account to your savings account. This allows funds to be transferred from savings to checking to cover transactions when your checking balance is low. However, ensure there are no penalties for specific withdrawals or frequent transfers from your savings.
• Opt-out of "overdraft protection". By opting out of overdraft protection, your transactions will be declined if there isn't enough money in your account, preventing overdraft fees. However, be aware of potential insufficient fund (NSF) fees, which will be discussed in the next section.

Insufficient funds (NSF) fees or non-sufficient funds fees are charged when the bank declines payments due to insufficient funds in the account. 

An NSF fee and overdraft fee are often confused, but they are distinct charges. Unlike overdraft fees, where the transaction is approved and the account becomes negative, NSF fees occur when the transaction is declined.

The fee varies from personal bank accounts to corporate bank accounts. If you make a payment with insufficient funds in your account from your corporate business account, the fee charged will be much higher compared to a personal bank account.

• Keep track of your account balance to avoid overspending. When monitoring, consider pending transactions like checks or upcoming automatic bill payments. 
• Consider using a prepaid card. These cards limit spending to the loaded amount and can help avoid NSF fees.

While you can use your own bank's ATM free of cost, you may have to pay ATM fees if you use one outside your bank's network. This is called out-of-network ATM fees.

Out-of-network ATM fees can consist of two parts:

• ATM operator fee: Charged by the ATM's owner (not your bank) for using their machine.
• Your bank's out-of-network fee: Your bank charges this fee when you use an ATM outside of its network.

• Using ATMs within your bank's network. Many banks provide ATM locators on their websites. 
• Some banks offer a limited number of free ATM withdrawals per month; be aware of this limit.
• Look for a bank with ATM fee reimbursement. Many banks reimburse ATM fees by tracking charges over a statement cycle and crediting the total back to the customer's account electronically. Online banks and neobanks, which often lack physical ATM locations, lead this trend, though reimbursement limits may apply.

Many accounts come with cards, and they have associated fees, namely:

• Card Issuance Fee: Charged once when your card is first issued.
• Card Monthly Fee: Some cards, especially rewards cards, charge a monthly fee for account maintenance and benefits access.
• Card Transaction Fees: Banks may charge a fee per transaction made with your card. 
• Lost Card/New Card Issuance Fee: If your card gets lost or stolen and you have to apply for a new bank card, your bank may charge you a fee. The fee often also depends on how fast you want your replacement card to be delivered. The earlier the delivery, the higher the fee.
• Late Fees: A late fee is charged if you miss your credit card minimum payment due date or make a payment that is less than the required minimum amount. The fee applies once per billing cycle and can harm your credit score if the payment is more than 30 days late.

• The most effective way to minimize card fees is to select ones with fewer fees from the start. Some cards do not charge monthly fees by default, while others waive fees if you meet specific spending requirements. 
• Evaluate rewards cards carefully for conditions such as spending thresholds to ensure that the benefits justify the expenses.
• Choose virtual cards, which offer higher security and can't be lost like physical cards, saving you on replacement and issuance fees.
• Set up automatic payments or add your due date to your calendar to ensure you pay on time and in full, thus avoiding late fees. Some banks waive the late fee for first-time occurrences. You can also try negotiating with your bank. 82% of people who request a late fee waiver from their bank get it waived

If you order a paper bank statement, you'll likely incur a small fee ranging from about USD 1 to USD 5 per statement. Banks charge for paper statements to cover printing and delivery costs. In contrast, there's typically no charge for ordering a digital statement. 

Most banks waive the fee if you sign up for digital statements or e-statements, which you can do through your bank's online banking platform or mobile app.

Checking accounts will likely have fees for getting checkbooks and check services. While some still offer complimentary checks, this is becoming less common.

Other fees when you use checks include:

• Counter Check Fee: Charged when you request a temporary check directly from the bank counter.
• Cashier's Check Fee: A higher fee for checks that guarantee funds availability, often used for large payments.
• Certified Check Fee: A fee for checks that certify funds are available in your account, providing assurance to the payee.
• Returned Check Fee: Charged if a check you wrote bounces due to insufficient funds or other issues.

• Select a checking account that provides a certain number of free checks each month.
• Take advantage of free mobile check deposits offered by some banks through their mobile banking apps.
• To cut fees, avoid paper and in-person transactions. Opt for other types of transfer methods when possible; online options generally have lower costs.
• If you use a lot of checks, ordering them from a third-party check printing service or major retailers like Costco, Office Depot, Sam’s Club, and Walmart is often the most cost-effective option. 

A stop payment fee is charged when you request your bank to block payment on a specific check or electronic transaction. This can be helpful in case of lost or stolen checks or fraudulent activity.

Some banks may charge a lower fee if you request a stop payment online or over the phone.

If you lose a check or notice suspicious activity, report it immediately. Some banks may waive the fee if it’s reported within a certain timeframe.

An inactivity fee or dormant account fee is charged when an account remains inactive for a specified period, often around six months, although this can vary between banks. 

Not all banks impose this fee, but when applicable, it serves as a way for banks to cover administrative costs associated with maintaining accounts that are not actively used. 

• Check your bank account's terms and conditions to understand if there are any inactivity fees, and note the specific inactivity period and fee amount.
• Schedule small deposits, withdrawals, or transfers to prevent your account from becoming dormant.
• Consider closing unused accounts to avoid future inactivity fees and to simplify your banking. While closing an account may involve a one-time closure fee, it can be cost-effective in the long term.

If you ever decide to close your account, whether you are moving out of the country or for any other reason, you may be hit with an account closing fee.

There are two main types of account closure fees:

• Standard account closure fee:  Some banks charge a fee simply for closing your account, regardless of how long it has been open.
• Early account closure fee: Some banks apply this fee if you close your account within 90 to 180 days of opening it. The early account closure fee is typically higher than the standard account closure fee.

There are limited strategies to minimize account closure fees, including choosing an account that doesn't impose them initially and negotiating directly with your bank, particularly if you have a strong relationship with them.

Bank fees can add up quickly, but there are several strategies you may use to either reduce the number of fees charged or avoid them completely. The key is to be informed and proactive.

The first step is to understand your bank's policies and requirements. Always read the terms and conditions, including the fine print, before signing up for an account. Doing so ensures that you understand what you consent to be charged for when using your bank account.

Next, monitor your statements to identify where costs are coming from and catch any unexpected or hidden fees. Signing up for email or text alerts can also keep you informed about important account activities, like low balances or impending overdrafts.

Lastly, consider negotiating with your bank. While success isn’t guaranteed, it’s always worth trying. The outcome of your negotiations may depend on various factors, such as your creditworthiness, the bank's policies, and the current economic climate.