Avoid Bank Fees

How does your banker get paid? By waiting to charge you fees, of course. Save hundreds this year by learning to spot and avoid bank service charges.

How does your banker get paid? By waiting for you to make a mistake, of course. According to the Federal Deposit Insurance Corporation, in 2004 banks and credit unions collected a record $37.8 billion in service charges–more than double the amount collected ten years ago. With cigar-smokin’ fat-cat bankers drooling and just waiting for you to overdraw your account, you had better know how to escape their bank fee traps.

Overdraft Fee (Non-sufficient Funds) – The most common bank fee, typically between $25-$50, occurs when you write a check (or make a debit purchase) for more money than you have in your account. Overdrafts occur when your check or electronic charge is processed and the bank has to front the cash to cover the difference between the payment and your account. “Ding!” Hello, fee. And we’re not just talking about bouncing your rent check–you bank will slam you if you overcharge by just a penny. Budgeting and balancing your checkbook are the easiest ways to avoid overdrafts, but you can also ask your bank for overdraft protection. If offered your bank can link your checking account with another account or credit card and charge any overages to that account, saving you the fee. Have an emergency? Try explaining extenuating circumstances to your bank. With a good enough sob story they may refund certain overdraft fees.

Withdrawal Fee – Certain savings accounts impose fees when you make more than a couple of withdrawals per month. Be sure to read the fine print before depositing to any savings account and only put money away that you know you won’t touch until reaching a goal.

ATM Fees – Automated Teller Machines may dispense money, but they’re good at taking it too! Unless your bank belongs to a free ATM network like SUM, chances are you will incur fees of $1.00-$3.00 at other banks’ ATMs just to take money out. And if you have a large bank with lots of ATMs of its own, watch out: your own bank may ding you with another fee of its own! Plan your cash needs ahead of time with cash envelopes to avoid using ATMs. Or, pay for groceries and other supplies with your debit card and use the cash-back feature. A note: fewer and fewer merchants require minimum credit card transactions, making credit card micropayments possible. To avoid ATM fees use plastic at McDonland’s, chain convenience stores, and more.

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About David Weliver

David Weliver is the founding editor of Money Under 30. He's a cited authority on personal finance and the unique money issues we face during our first two decades as adults. He lives in Maine with his wife and two children.