Fees for checks, ATM withdrawals, overdrafts, are just a few to name. If you think you’re getting a “too good to be true” deal to bank with an institution it may be the case. They’re going to make their money somehow; just don’t let it be from your fees. Dig deeper and check out other ways the bank may get their money from you….often times it’s through additional fees.
As part of the banking decision talk to a branch representative to discuss ways to maximize interest and minimize your fees. Interest rates and fees vary by institution, account type, and balance. You may be able to get a higher interest rate if you commit to maintaining a certain balance. Ask the bank about what else they can they offer you that their competitors can not.
Banks often offer an incentive such as couple hundred dollars if you open up an account. That amount of free money can be larger depending on the amount of your initial balance. This is a lucrative short term gain but may cost you more than another institution would based on the ongoing fees. Be careful making a short term decision for a small gain but long term pain.
Account Maintenance Fee
An Account Maintenance Fee is a service charge that’s imposed if an account balance drops below the bank designated minimum. The bank needs your money to make money and if accounts are allowed to be too low it becomes more difficult for the bank to make money.
It doesn’t hurt to contact your bank in advance if you know your account will drop below this threshold and perhaps they will waive the fee. If you’ve already been charged the fee and you have a good track record you may be able negotiate with the bank to remove the fee.
Insufficient Funds Fee
An Insufficient Funds, or Non-sufficient Funds (NSF) fee is assessed with a check is written from a checking account that doesn’t have enough money to cover the value of the check. Sometimes referrered to as a “bounced” check. This fee usually ranges from $25-$35 per check.
It’s also possible that the person writing check(s) with NSF could face criminal charges. NSF is slightly different than an Overdraft Fee although you may get a charge called an “Insufficient Funds Fee” if the overdraft amount is paid by the bank. Read below for an explanation on overdrafts.
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An Overdraft Fee occurs when there is not enough money in a checking account but the bank honors the transaction and charges a fee (since it is their money being borrowing) or otherwise, for example, the check would bounce or one would not be able to withdraw an amount from an ATM that exceeds the account balance. Some banks offer a short grace period where if you transfer or deposit funds to cover the overdraft by the end of the business day the overdraft fee can be waived.
Banks often offer different levels of checking accounts and some likely have waiver policies with certain qualifiers. If you find yourself getting penalized with the NSF or Overdraft Fees, talk to a manager to see what they offer to cover this risk. Plenty of banks do offer these options if your bank doesn’t.
Line of Credit
Many banks also offer overdraft lines of credit to allow (not necessarily all) transactions to be honored. Usually this covers overdrafts from checks, automatic payments such as utilities, reoccurring debit card purchases such as a membership or subscription, but not necessarily debit card purchases for food, gas, and clothes).
A line of credit is usually an option you must apply for and depends on your credit score and more but this doesn’t mean that an overdraft comes without penalty. Banks usually charge a fee of $25-$35 for each incident and can eventually remove the option and pursue collections. There may be additional fees if the account is overdrawn multiple times within a short period of time.
This line of credit should be used to cover emergencies or other unplanned and infrequent expenses rather than become a dependent source of coverage. Many banks also allow accounts to be linked to a credit card to pay the overdraft amount and avoid this fee. Ongoing abuse can impact credit scores (and future borrowing rates) that are maintained by the three primary credit agencies: Transunion, Experian, and Equifax
A Transaction Fee, in this context, is a flat rate expense paid by the merchant for each credit card transaction. As a consumer using a credit card at a merchant you may not “feel” this fee but it is baked into all the costs of the good/services that consumers purchase from a merchant.
Merchants usually pay credit card processors a few percent of the transaction amount plus a fixed rate of $0.20 – $0.30. The amount varies among the credit card processors and negotiations with a particular merchant.
The point is (for the consumer) when there is a possibility of paying cash (such as for gasoline in many cases) you could negotiate a discount. Obviously the merchant avoids this fee and you should ask for that portion go back to you. On the flip-side, you may miss earning reward points on your credit card. If you’re getting 1% in reward points and you have a merchant that will take 4% off for cash, then it makes sense to pay the cash.
Stop Payment Fee
A Stop Payment Fee is assessed when you tell the bank not to process a check. These are normally steep fees. Apply a stop payment only when you feel highly necessary. As with many banking fees, if you have a lot of money with the bank or a long term relationship you may be able to contact a branch manager to negotiate.
Banks often allow a certain amount of free ATM transactions over a period of time or designated terminals with zero transaction costs. Non domestic ATMs may have additional fees but again, various accounts depending on the bank, may have options to waive or minimize these fees.
ATM fees are usually $2-$5 per transaction so obviously the more money withdrawn per transcation the lower the percentage of the fee. If you regularly take out money and are assessed this fee, consider taking out a large lump sum of cash to store in a safe place at home to avoid ongoing ATM fees.
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Safety Deposit Box
A safety deposit box may another choice you have to protect valuables at the bank. The rental fees usually run from $25-$200/yr but could be negotiable depending on the customer. There are pros & cons to this option when compared to a safe at home.
Access is limited to the hours of the bank and there have been rare incidents of theft so keep a list (and pictures if applicable) of items within the box. And don’t lose your key because getting your lock rekeyed is expensive. The contents within the box are likely not insured by the bank and banks are not immune to natural disasters either. Safety deposit box fees are no longer tax deductible.
You’re responsible for keeping up on the payments or, depending on the state and after a notice period, the bank may be allowed to sell the contents of the box to pay for late fees. Any extra money is turned over to the state as unclaimed property. Click on the link below to look for Unclaimed Property that could belong to you or someone you know.
Other Banking Fees
Be wary of other banking fees such as the following. Take a checklist and ask your bank to explain all the fees. The list below and mentioned earlier may not be all inclusive.
1) Counter Checks – convenient when you run out of paper checks and need one in a rush.
2) Cashier’s Checks
3) Money Orders
4) Lost Debit Card
5) Checks – and further additional costs for design printed on the checks
6) Paper Statements
7) Foreign Transactions – credit card and ATM fees can be assessed this fee.
9) Account Termination
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