K26 How to Avoid Bank Fees and Make Your Savings Grow Faster

How to Avoid Bank Fees and Make Your Savings Grow Faster

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Having a bank account makes life a lot easier: your money is safe, accessing it is convenient, you can get your paycheck a few days sooner with direct debit, automating bill payments is easy, and saving money for the future becomes much simpler. A bank account also gives you easier access to other kinds of financial products, like credit cards and personal loans.

It’s not all roses, though. If you don’t know how to avoid bank fees, you may well end up paying more than you earn from interest or save on transaction costs. Unlike with (say) a subscription to an online video streaming provider, banks typically don’t charge a flat rate for their services. Instead, how much you pay depends on how you use your account. This basically amounts to a tax on people who don’t know how to avoid bank fees: banks rake in billions from their customers each year, often placing a disproportionate burden on the families who can least afford it.

The most surprising thing about this situation is that most Americans don’t even know how much money they lose to bank charges – more than a hundred dollars per year on every account, on average. This is in spite of all banks publishing their fee structure, though some communicate this more clearly than others. It seems that a large part of the problem comes from people simply not reading the fine print, or not bothering to change their banking habits to minimize these expenses. This doesn’t have to be you: once you understand which common bank fees are making a dent in your savings, avoiding them becomes easy.

Banking Fees, Bank Charges, and How to Avoid Them

Everybody, including banks themselves, is always telling us to save more. This is good advice as far as it goes, but it neglects to mention that even preparing for a rainy day can cost you money.

Once you add in the costs associated with managing your money and moving it from one place to another, it soon becomes clear that knowing how to avoid bank fees is a financial skill almost as useful as budgeting and negotiating a better deal with your employer. Many of these charges are stealthy, though: you may not even realize how much money you’re losing every month unless you go through every line on your bank statement. Here are some of the items you may come across there:

bank fees average over 100 per year

Overdraft Penalties

Recently, a lot of bank account holders have become painfully aware of how overdraft charges can bite. With so many people being laid off or furloughed (and caught out without an emergency fund), plenty of them found out that not having money in your account can actually drive you deeper into the hole.

Overdraft fees are charged when a third party claims money from your bank account but there aren’t sufficient funds available to cover the transaction. This may happen when you buy something worth $100 with your debit card while your balance is only $50, someone deposits one of your checks without you having enough money in your account, or a recurring bill payment goes through before your paycheck is deposited.

Depending on what kind of account you have, the bank may transfer the funds anyway, a practice known as overdraft protection. This will, however, send your account balance into the red as well as costing you about $35 – this is per transaction, meaning that you may be hit with multiple such charges on the same day.

How to Avoid Overdraft Penalties:

  • Guarding yourself against overdraft fees begins when you open an account. If you opt out of the bank’s overdraft coverage service, your card will be declined rather than process an overdraft (though bounced checks and failed automatic bill payments will still garner fees).
  • If you have savings and checking accounts at the same bank, they may allow you to set up an automatic overdraft transfer from one to the other for less than the standard overdraft fee.
  • Using a free budgeting app can make it clear when money is coming into and leaving your account, allowing you to schedule payments so your funds don’t run dry. You can also set up text or email alerts from your bank whenever your account balance dips below a certain level.

Paper Statement Fees

One of the most useful aspects of having a bank account is the ability to see, on your monthly statements, exactly where you are financially and how well this compares to your goals and plans. In a digital world, however, there’s really no need for you to get this information on paper: use email or your bank’s website instead and save a tree. If you do prefer to keep physical records, you can always print your electronic statements out at home.

How to Avoid Paper Statement Charges:

  • Most banks require you to opt out of being mailed paper copies of your statements. Doing so will probably save you around $2 per month.
checking your statements online saves on banking fees
Image by Yongho Ki

Minimum Balance Charges

When you shop around for a new savings, checking, or investment account, you’ll notice that some of them have very competitive fee structures if you maintain a deposit amount above some level, usually a few hundred dollars. Other banks, instead of calling this a discount, penalize you for not keeping enough money with them. This is often called a monthly maintenance fee.

At least from the bank’s perspective, charging this makes sense: account fees, high as they are, don’t by themselves cover the cost of administrating a checking account. The difference is made up by the bank putting your money to work, either investing it or lending it out at interest to other people. Should you not keep a sufficient balance in your account, the bank is actually losing money on having you as a customer. To compensate, they charge you a monthly service fee just for keeping the account open. This can range from about $5 to over $20 a month depending on how many bells and whistles come with your type of account.

How to Avoid Minimum Balance Charges:

  • Configure your bank’s app to alert you when your account balance dips below a certain level, or use a third-party app that connects to your account.
  • Many banks will waive their maintenance fees if you open both a savings and checking account with them, set up a monthly direct deposit, or perform a minimum number of debit card transactions per month. If you want to know how to avoid bank fees of this kind, read the fine print.
  • If maintaining a minimum amount is likely to be a problem, look around for an account that offers no-fee checking, perhaps from an online-only bank.

ATM Fees

However popular new digital payment methods become, cash will remain king under some circumstances. For one thing, handling physical banknotes and coins gives you a real sense of how much you’re actually spending and saving. For another, the question of how to avoid bank fees becomes less important once you already have cash in your hand.

Most banks allow you to withdraw money free of charge at several thousand affiliated ATMs. You are still free to use any machine you want, but beware: your bank will most likely charge you about $2 for doing so, on top of a fee of perhaps $5 levied by the ATM owner.

How to Avoid High ATM Fees:

  • Research your bank’s free ATM network before you open an account with them. They may, for instance, not be well represented in your state or town.
  • Identify a couple of fee-free ATMs near where you live, work, and shop, and try to use only these to top off your wallet.
  • When traveling abroad or if forced to use an ATM outside your bank’s network, withdraw larger sums at a time. This works out more cheaply on a percentage basis.
avoid out of network atms and high fees

Excessive Transaction Fees

Many people open a savings account without reading through the terms and conditions. One of these is that, according to federal regulations, you’re allowed only six free withdrawals and transfers per month from this type of account. (Note that this provision has been suspended during the coronavirus emergency.)

Exceeding this limit can cause you to be hit with some serious fees: in some cases, up to $25 per transaction. If you do so routinely, you may even be notified that the bank has closed your account or converted it to checking. There’s usually no restriction on how many deposits you can make in a statement cycle, but you may want to check with your bank to make sure.

How to Avoid Excess Activity Fees:

  • Use each type of account as it’s meant to be. Instead of paying bills from your savings account, open a checking account for day-to-day use

Inactivity Fees

Strange as it seems, you can be charged extra for moving money through your bank account either too frequently or not often enough. People do occasionally forget about bank accounts or simply neglect to close them. This represents an administrative headache to the bank; levying a fee on dormant accounts allows them to draw down the balance until it’s at zero and they can wipe the account off their books.

Some banks start to charge inactivity fees after six months with no money flowing into or out of an account, others allow you as long as two years to start using it again. These fees range from $5 to $20 per month.

How to Avoid Bank Fees on Dormant Accounts:

  • Before you move across country or take your business to another bank, make sure that all the accounts you’ll no longer need are closed out properly. It is your money, after all.

Wire Transfer Fees

Whether for buying something online or helping out a distant relative, wire transfers are a very secure and fast payment option. They don’t, unfortunately, come cheap: at roughly $20 within the United States and $35 to send money abroad, you may be better off using a money order.

How to Avoid Wire Transfer Fees:

  • Look into alternative payment platforms like Venmo, Zelle, and Paypal – many offer a similar level of protection and charge much lower fees.
  • If the person you’re sending money to has an account with the same bank as you, you may be able to use their app or website to make the transfer without paying any fees at all.
  • Some banks also charge you for accepting a wire transfer. If you are going to be receiving money in this way on a regular basis, you should check their policy on this.
how to avoid wire transfer fees 2

Returned Deposit Fee

For the most part, figuring out how to avoid bank fees isn’t difficult: just select the type of account that suits your circumstances best and then do what the bank expects of you. Occasionally, like when you want to find out how to avoid wire transfer fees, the solution may be a little more complicated, like avoiding banks altogether and using alternative financial services.

Returned deposit charges, unfortunately, are not under your control. These fees apply when someone else gives you a check which happens to bounce: they will of course be slapped with a non-sufficient-funds penalty, but you will also be charged between $20 and $40 for having deposited it. In addition, if you were relying on those funds, you could also face an overdraft penalty.

How to Avoid Returned Deposit Fees:

  • Deposit checks as soon as you get them – presumably, the person writing them will at least have funds in their account at that moment.
  • Post-dated checks can be processed before the indicated time, but it may be better to wait until the date specified by the person paying them in case they’re waiting on a cash infusion.
  • Remember that you are under no obligation to accept a check as payment. If it’s from somebody you don’t know or who has a history of financial irresponsibility, you can ask for cash instead.

Account Closing Fee

With banking, as the saying goes, they sometimes get you coming as well as going. Opening an account for a new customer carries a significant administrative cost for the bank; they have to, for instance, make a reasonable effort to verify that you are who you say you are. This represents a loss to them if you close the account within a short period of time. In some cases, banks offer attractive incentives to new account holders; obviously, they don’t want to encourage people to simply grab the bonus and run.

Closing an account that’s less than 60 to 180 days old therefore comes with an early closing surcharge. It’s recommended that you pay this instead of simply clearing out the account and disappearing, though. Banks do keep tabs on who is and isn’t a responsible customer and even share this information with other financial institutions. Not properly closing an account and perhaps letting inactivity fees pile up can therefore come back to haunt you when applying for an account at another bank.

How to Avoid Account Closing Fees:

  • Different banks have different policies on early closing fees. If, for instance, you’re going to spend a few months someplace where your usual bank doesn’t operate, ask in advance whether this kind of fee applies and whether or not it can be waived for an account you only need temporarily.

To Bank or Not to Bank?

Now that you’ve learned a little more about all those sneaky fees banks love to charge, you may be wondering whether closing your accounts entirely may not be how to avoid bank fees. There are, after all, other ways of managing your money, including prepaid debit cards that offer many of the same advantages as a traditional checking account.


Don’t be too hasty with this decision, though. In particular, having a bank account, even one costing you over a hundred dollars a year in fees, may be worth it if:

  • You operate a business, even if only as a side hustle. Being able to connect your financial statements with bank records can be a big help, for instance when trying to sell it as a going concern or if you need to prove your taxable income.
  • You will want to apply for credit, such as an auto loan or mortgage, within the next couple of years. Banks are considerably more accommodating when making a loan to existing customers, and alternative payday loan providers generally insist on their customers having an active bank account.
  • You have trouble staying on top of your finances. The ability to automate paying your bills and compare your budget with a bank statement can be a big help to the financially scatterbrained.

At the same time, if saving up for the future is your priority, you should be aware of how banking fees, bank charges, and various penalties levied on your account can affect your nest egg. Once you add up all of these, you may well find that they outweigh the interest you earn on your balance. If this is the case, it may be time to move your money somewhere else: either a new bank account that charges lower fees or a dedicated investment vehicle.




    36 thoughts on “How to Avoid Bank Fees and Make Your Savings Grow Faster

    1. Mark B says:

      The bank fees are enormous and whatever you do they will take their fees. At least you can try to keep the regular fees and not paying for overdraft payments.

    2. Senidah says:

      I am pretty confused with all their fees and when I regularly check my bank statements, I am always surprised how much they charge.

    3. Renata says:

      I pay almost everything digitally and I very rarely goes to bank in person. I check the bank statements on my smartphone, and sometimes if I calculate the bank fees cost a lot.

    4. Holly says:

      To avoid withdrawal fees from the ATM you have to withdraw from the ATM that belongs to the bank and the card issuer.

    5. Marylin says:

      I closed my bank account and paid all the fees for closing, but now I am sorry. If I didn’t I would had more options now when I am out of work.

    6. Lynn says:

      You should check your bank statements all the time because the bank makes mistakes and if you do not react on time they will just charge fees

    7. Anna says:

      I received money by mistake of the bank. When I reacted they took the sum and charged me a fee because of their mistake. I have to complain again in order to return the fee that they charged.

    8. Emma says:

      I try to save some money and it turned that the fees were bigger than the interest. It really does not make any sense.

    9. Emanuel says:

      When opening a bank account you should read the fine print and ask all the possible questions about fees if you don’t want to come to a situations to pay high fees for almost every transaction.

    10. Carlito says:

      I never pay attention to the bank fees but you are right, we should consider opening accounts in the banks where this fee is lower.

    11. Mirela says:

      You are right for wire transfer fees. I send some money every month and the fees are big. I will have to find another way of sending immediately.

    12. Cathrine says:

      I am so used to the bank fees that I hardly pay any attention to it anymore

    13. Novica says:

      Very nice article. We should all pay attention to throwing money in vain and cutting on bank fees if possible is a good advice.

    14. Costa says:

      I have only one bank account. This way I keep the fees to minimal

    15. Azra says:

      Being able to cut on unnecessary payments and bank fees is essential. We are not aware of how much money we pay and how we can save on those expenses that include bank fees.

    16. Besim says:

      When abroad withdrawing money from the ATM can be expensive. It is better to carry some cash for small purchases and to pay with electronically in restaurants and shops.

    17. Livia says:

      Understanding the way of how banks charge and how much you can save you have to be a financial wizard. Being an average user I am happy if these fees are not very high and I can afford them

    18. Aida says:

      You mentioned all the ways of how we can save. You are right we can save a couple of hundreds annually if we pay attention on what they are charging and open accounts in banks with smaller fees

    19. Martin says:

      I have different accounts for different purposes. And I pay attention on all the fees that the bank charge on my accounts.

    20. Sara says:

      I left one bank account without money and I did not close it on time, so they started to charge the monthly fees for inactive account. It cost me a lot of money. Now I am more careful with what I do in terms of accounts and cards.

    21. Burk says:

      I transferred to receive all my bank statements through email. This way the banks charge less for not mailing it through regular post.

    22. Milena says:

      As it looks like it is the best to keep your cash under the pillow. This way you will skip excessive bank charges

    23. Calina says:

      If you have a bank app on your smartphone it can alert you every time when the bank is charging something and that way you will know when there some overdrafts on your account

    24. Boki says:

      Paying digitally is the safest way to pay some bills and to make sure that bank charges are minimal

    25. Kenan says:

      I don’t think that we can avoid all the bank fees but some of them definitely. Just pay attention to what they are charging.

    26. Rowan says:

      Banks even know to make some mistakes and charge something double. Check your bank statements and alert on time if such mistakes happen

    27. Nolan says:

      Luckily I have only one bank account and one card so I can keep track of the fees they charge

    28. Christian says:

      I was never been able to determine exactly what are they charging. It looks like that the banks charge whatever they want

    29. Ivan says:

      I was never been able to determine exactly what are they charging. It looks like that the banks charge whatever they want

    30. Reno says:

      Very nice tips for saving money on fees. Thank you Promoney

    31. Yolanda says:

      Having bank cards and few bank accounts may help you pay all your bills on time. You will have to get on terms with the fees they charge

    32. Beata says:

      Opening an account will cost you, closing the account will cost you, taking a card will cost you, banks charge everything. Not to mention the penalties for late payments.

    33. Paris says:

      If you have a bunch of bank cards and bank accounts your fees can reach $100 per month.

    34. Zoya says:

      When I opened my first account I made sure to check at what bank they have the lowest fees. Now I do not follow that any more and with all the bank cards that I own and all the bank accounts I am paying a lot of money for fees.

    35. Ronan says:

      You could not avoid paying the bank fees for the accounts and bank cards but you can make sure not to pay penalties unless it is extremely necessary.

    36. Klelia says:

      We all should cut on all the expenses that are not necessary. Knowing how to handle bank accounts and cards surely cam save you a lot of money

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