Bank Fees: Here’s How to Avoid Them
If you’re like most consumers, you’re constantly looking for ways to save money. However, that can be hard to do when you’re hit with fees. This is often the case when it comes to banking. Fees can hit you when you least expect it. The Cheat Sheet spoke with Ken Tumin, the founder and editor of DepositAccounts.com. The researchers at DepositAccounts.com conducted a study to find the highest and lowest bank fees across the country. Here are some tips from Tumin on how to find the best rates, avoid excessive bank fees, and save more of your hard-earned cash.
The Cheat Sheet: What surprised you the most about this study?
Ken Tumin: The cities that had the lowest bank fee burden tended to have a higher concentration of credit unions and community banks while the cities that had the highest bank fee burden tended to have a higher concentration of the large banks. That wasn’t surprising, but it was surprising to see Florida cities such as West Palm Beach, Orlando, Tampa, and Miami be on top of the bank fee burden list. The large banks including Chase, Wells Fargo and Bank of America have a high number of branches in all of these cities. While Western and Mid-Western cities such as Oklahoma City, Salt Lake City, and Kansas City had a higher concentration of credit unions and community banks, and a lower concentration of branches of the large banks.
CS: What do consumers do that raise the likelihood they will be hit with a bank fee?
KT: When consumers don’t plan for hard times, the odds of being hit with more bank fees rise considerably. For example, if you lose your job, your bank balance may fall, making it more likely that you’ll be hit with overdraft fees and monthly service fees. With more planning, consumers can take steps to reduce the chance of fees when hard times occur. For example, a checking account that is free only with direct deposit or when a minimum balance is maintained may be fine when you’re employed, but when a job loss occurs, it can become difficult to avoid the monthly fee. That’s why it makes sense to choose a free checking account when times are good.
CS: Do you have any tips for how consumers can negotiate the fee or even have it waived?
KT: It’s important to regularly monitor your bank account so that you’re aware that a fee has recently occurred. If it’s the first time you’ve been hit with the fee, you’ll likely be successful when asking for a courtesy refund. The chance of a refund goes way down if you’ve waited too long or if you’ve been hit multiple times by that fee.
CS: Which bank had the highest fees? Which had the lowest?
KT: Overall, brick-and-mortar banks had the highest fees. Credit unions had lower fees than brick-and-mortar banks, but not online banks. Online banks had lower fees than both brick-and-mortar banks and credit unions.
For specific institutions, Wells Fargo was one of the banks that had the highest fees overall. Mountain America Credit Union, a large credit union in the West, was one of the institutions that had the lowest fees overall. Bank5 Connect, an online bank, had the lowest fees overall out of all the institutions sampled.
CS: How can consumers avoid overdraft, third-party ATM, and monthly checking fees?
- Avoid overdraft protection. The first step to avoid overdraft is to avoid opting in to overdraft protection. If you choose to opt in to overdraft protection, the bank allows you to make ATM withdrawals and debit card purchases even if you do not have enough funds at the time of the transaction. However, you will likely incur an overdraft fee on each transaction that overdraws the account.
- Choose an institution that offers free overdraft transfers. An overdraft transfer takes place when an overdraft occurs on a checking account and an amount necessary to cover the overdraft is automatically transferred from the consumer’s savings account to the checking account. Many banks and credit unions charge a fee for each overdraft transfer.
- Choose a bank or credit union that offers a large ATM network. The best way to avoid third-party ATM fees is to choose a bank or credit union that offers a large ATM network where you can use the ATMs without a fee. This doesn’t have to be a large bank. Many small banks and credit unions are members of ATM networks that provide the consumer with free use of ATMs around the nation.
- Use free checking accounts. The best way to avoid a monthly checking fee is to avoid checking accounts that are not free checking accounts. Free checking accounts have no monthly fee regardless of balance or activity.
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