What Exactly Is This Bank Charge, and Can It Be Avoided?

Unexpected bank fees can come as a shock, especially if you don’t have much money to start with. And, of course, those with less money are actually more likely to find a bank charge they weren’t prepared for on their statement. Here are a few common bank charges, and how to avoid them.

Minimum balance fee

Most banks don’t go out of their way to draw attention to this, but if your balance goes below a certain amount, you can be charged a fee. Yes, they will actually take money from you as a penalty for not having enough money. The minimum balance required varies depending on your bank and the type of account you hold, but could be anything from $20 to $1000. You also need to be aware that sometimes going below your minimum balance may mean you no longer receive interest, or even that the bank has the right to close your account. Check what the minimum balance is on each account you hold, and ask your bank if they offer an account type that doesn’t charge a minimum balance fee. You’ll often find that online accounts and student accounts do not have a minimum balance requirement.

Overdraft fee

Another charge that tends to come at the very worst time is an overdraft fee. Many banks will spare you the embarrassment of having your card or payment declined by allowing you to spend money you don’t have. Unsurprisingly they don’t do this purely as a favor to you. The privilege of having your bank honor a payment when there’s not enough money in your account comes with a (sometimes substantial) overdraft fee. It’s even possible that your bank account could run low, incurring a minimum balance fee, which then takes you into overdraft, incurring a further fee. To avoid this, keep a close eye on your available balance at all times. A banking app you can access easily on your phone can be helpful.

NSF fee

This is perhaps worse than an overdraft fee, as you get the embarrassment of a payment not going through, and still get charged. A nonsufficient funds (NSF) fee is charged when the transaction is declined and the bank still charges you a fee for trying to use money you don’t have. Again, carefully monitoring your available funds should prevent this from happening, but be aware that there are things that can trip you up. Both overdraft and NSF fees can be triggered, for example, if a regular payment goes out, or a check clears before you’re expecting it to, perhaps before your paycheck has cleared into your account. Make sure you set up any automated payments that are coming out of your regular paycheck, with a little buffer time in place to ensure that paycheck has actually gone into your account.

Account maintenance fee

This is the fee that the majority of banks charge just for the privilege of having an account with them. It varies between banks, but the Money Rates Bank Fee Survey found the average maintenance fee was $13.95 per month, in early 2021. The good news on this one is that the survey also found that around 37% of checking accounts now have no monthly maintenance fee at all. So if yours still does, it may be worth shopping around for a new bank. As with most other fees, digital banking may be your best bet, with online checking accounts found to be twice as likely as branch-based accounts to offer fee-free banking.

ATM fee

Some ATMs will allow you to withdraw cash for free. Others will levy a surcharge or even a combination of different surcharges. Most banks won’t charge you to use an ATM that’s owned by the bank, or part of their network. Using a different network’s ATM, however, could incur an out-of-network charge by your bank, plus a charge is taken by the ATM operator. If you use an ATM abroad, you’ll probably be looking at a foreign transaction charge and a currency conversion charge as well. The easiest way to avoid these charges is to plan ahead and withdraw money when you’re near an ATM that you know won’t charge you, and use debit and credit cards to pay for things rather than drawing out extra cash from out-of-network ATMs. You’ll also want to plan ahead when you travel, to avoid using those expensive overseas ATMs, and it’s not just ATMs you want to worry about.

Foreign transaction fees

Your bank will charge you a foreign transaction fee for every purchase you make abroad using your US debit card. Every bank has different policies for this. You may find yourself charged a flat fee that could potentially double the charge on a small transaction or a percentage fee that could add a significant sum to a larger transaction, or both. Sometimes you’ll even find a foreign transaction fee applies if you order something online from another country. Be aware of exactly what your bank’s policy is, so you can either avoid extra fees or budget for them. You could also consider buying foreign currency in advance, using traveler’s checks, or getting a pre-paid foreign currency card if that will work out cheaper for you.

There are two big ways you can avoid many of these charges, once you’re aware of them. The first is to monitor your finances carefully, day-by-day, which is a really good habit to get into anyway. The second is to shop around for banks that don’t charge these fees, or that have low fees overall. If you’re a student, you may find that your bank offers an account with lower fees, and some fees waived completely.

Online accounts also tend to have fewer and lower fees, although they come with various disadvantages as well, such as not having a branch to visit when you have problems. Look closely at all the pros and cons if you’re considering going fully digital with your banking services, and always pick a bank that suits all your circumstances, as far as possible.

Karen Banes is a freelance writer specializing in entrepreneurship, parenting and lifestyle. She writes articles, website content, ebooks and the occasional award winning short story. Her work has appeared in a range of publications both online and off, including The Washington Post, Life Info Magazine, Transitions Abroad, Brave New Traveler, Natural Parenting Group, and Copia Magazine. Learn More About Karen