Banks are always looking for new sources of profit — and often find them at the expense of regular bank customers in the form of new and increased fees.
Free checking accounts are increasingly hard to find in traditional banks. And often they are only granted to customers with high bank balances.
In recent years, there have been increases in many types of fees, including:
- Monthly maintenance fees for checking accounts
- Overdraft fees
- ATM fees banks charge their own customers for using an out-of-network ATM
- ATM fees a bank charges non-customers for using the bank’s ATMs
Still, you can find ways to avoid being gouged. Following are 14 ways to sidestep or minimize bank fees:
1. Avoid big banks
Big banks (with at least $15 billion in deposits) tend to charge more for checking accounts than smaller banks, and relatively few offer free checking, reports Moneyrates.com, in a recent bank fee survey. According to this research:
The average maintenance fee at a large bank is $14.93, compared to $11.06 at medium-sized banks and $11.09 at small banks. Even more significantly, large banks are the least likely to offer free checking. Just 24 percent of large bank checking accounts charge no monthly maintenance fee. About 28 percent of checking accounts at medium-sized banks offer free checking, but this becomes much more common when you move down in size to small banks. Nearly 41 percent of checking accounts at small banks have no monthly maintenance fee.
So, if low fees are your most important consideration, shop around for a smaller bank.
2. Shop for an online bank
There may be some disadvantages to leaving your brick-and-mortar bank, including greater difficulty making large withdrawals because of ATM daily limits, for instance. You may miss the access to in-person customer assistance and extras like notary services. But because online banks have lower overhead, they can afford to charge you less.
If you shop for an online bank, you will find that the majority (61 percent according to MoneyRates) do not charge monthly maintenance fees. The fees they do charge are generally lower across the board than traditional bank accounts, the survey indicates:
The gap between online and traditional account monthly fees is not only wide, but it is becoming larger. In the most recent survey, the average online maintenance fee declined while the average traditional account maintenance fee increased. … Online accounts also have a pricing advantage when it comes to overdraft and ATM fees, but nowhere is the difference as great as it is for monthly maintenance fees.
Here’s how to find a secure, trustworthy online bank.
3. Shop for a credit union
Some people are not comfortable with online banking. No problem: Credit unions offer another option that is generally less expensive than commercial banks. Many credit unions offer free checking without requiring a minimum balance.
But do not assume all credit unions have low fees or free checking. Compare costs at credit unions versus banks, because their fees and policies can vary greatly. The larger credit unions often have lower fees and better rates, says Consumer Reports.
Check out “9 Reasons a Credit Union Is Better Than a Big Bank.” Find one near you by searching at the National Credit Union Administration website.
4. Shop for a community bank
Fees also can be lower at community banks, Consumer Reports says.
Community banks pride themselves on customer service so they often will keep fees lower. But, again, it all depends on the bank you choose, so shop around.
5. Use electronic features
“Banks save when you serve yourself, just like gas stations do when you pump your own,” Consumer Reports says.
Here are two ways to save using electronic features:
- Opt out of paper statements. Receive online statements if your bank charges customers for paper statements. It is a win for the bank (reducing its printing and mailing costs) and for the environment.
- Switch to online bill pay. You can stop buying envelopes and stamps for paying bills, and automate your payments so you will never again incur a late fee for forgetting to pay a bill.
6. Sign up for direct deposit
Some banks and credit unions offer free checking for customers who sign up to have paychecks and certain other regular deposits electronically deposited into the account.
7. Look for a volume discount
Some banks waive fees or give a discount when you maintain multiple accounts, but be sure to ask, because this is not a certainty. According to Consumer Reports:
Customers with a lot of accounts at one bank might avoid some fees, but they’re not immune. Banks may try a spectrum of charges even for good customers, including fees for paper statements and higher safe-deposit costs.
8. Maintain a minimum balance
Banks often waive the monthly checking account fee if you keep a minimum balance in the account.
Keeping a balance also helps you leave a buffer for mistakes or miscalculations. But much depends on the size of the balance required. You may have better uses for a large amount of money — such as retirement or investment accounts with potential for growth.
Before signing on, read the rules for each type of account. Are you required to keep a minimum average balance each month? Or is your balance never allowed to dip below the minimum amount?
9. Get cash at the grocery store
Avoid ATM fees and the inconvenience of finding a machine by paying for your groceries with a debit card and getting cash back.
10. Use only network ATMs
Fees pile up when you use an out-of-network ATM: You pay the network’s charge, and, on top of that, your own bank charges a fee for going out-of-network.
Instead, carry a minimum amount of cash at all times so you will not be forced to use a “foreign” ATM. If you must use an out-of-network ATM when traveling or shopping, for example, withdraw a large amount so you will not have to come back for more.
11. Subscribe to email and text alerts
Use your bank’s system of electronic alerts to receive a text or email when an account balance dips below a certain limit. You can choose the limit yourself.
12. Cancel overdraft protection
Overdraft protection programs can cause fees to spiral out of control. Instead, Consumer Reports suggests:
- Decline overdraft protection. If you have already signed up, you can contact your bank to opt out. Your debit card will be declined if you exceed your balance, but you will not get hit with overdraft fees.
- Link your accounts. Ask your bank to link your savings to your checking account for overdraft protection. You might get hit with a transfer fee, but it is generally lower, about $5 to $10.
- Consider an overdraft line of credit. Any overdrafts will be covered by the line of credit. They will incur interest but you will probably pay less than overdraft fees.
13. Track your money closely
Form a new habit: Track your spending closely. This will help you prevent exorbitant overdraft fees, not to mention overspending on unnecessary purchases.
It does not matter what system you use for tracking. You can use an automated expense tracker like Quicken, Mint or PowerWallet, to name just a few. You also can keep a handwritten account or use a spreadsheet like Excel or Google Docs.
14. Be willing to move
Do not be captive to inertia while small fee increases pile up. Comparison shopping does not need to be time-consuming. Make a list of the features and services that matter most to you and compare costs for those at several institutions by phoning or going to their websites. For some pointers on chancing institutions, check out: “5 Simple Steps to Painlessly Switch Banks.”
What are your tips for low-fee banking? Share your thoughts in comments below or on our Facebook page.
Kari Huus contributed to this post.