bankfeeLike the airlines and utilities, the retail banking industry has been using nit-picky fees as a way of generating more revenue.  Last year, banking consumers paid out $32.5 billion in bank charges and penalties.   Initially, it started with overdraft fees in the 1990s.  Then ATM fees started skyrocketing in the 2000s.   Now, banks have large lists of fees  – some as many as 50, just for checking accounts.   It’s little wonder that gig banking and financial services firms like Bank of America and JPMorgan Chase are among the most disliked companies in America, according to a 2015 Harris Poll, right up there with cable and insurance companies. Wire transfer fees, maintenance fees, paper statement fees, check-cashing fees, returned deposit fees, excess transaction fees, minimum balance fees, and foreign transaction fees are among the most common on a lengthy list of ways your bank can profit off of you. Fortunately, there are two ways to fight back against unfair bank fees.  But, while on that topic, just consider a rather horrific “schedule” of fees from Bank of Internet, which until recently had some pretty pro-consumer policies:

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Worse yet, these fees are buried deep in a 41 page “disclosure” document hidden on Bank of Internet’s website and only accessible if you are logged out of your checking account! While probably not the worst offender, Bank of Internet is an online bank with low-overhead and a previously good reputation.   But the maintenance fee bug has bit Bank of Internet, and many other banks, hard.  Account holders are paying record-high fees for everything from withdrawing money from an ATM outside their bank’s network to overdrawing their account. The average checking account has 25 fees, according to a 2015 survey by WalletHub.  And one-fifth of U.S. banks still don’t provide a list of these charges before a customer submits an online application.   The others may claim to disclose the fees, but good luck finding them!

Some banks charge as many as 50 individual fees for checking accounts, according to the survey by financial website WalletHub.com.  If you thought prepaid cards charged a lot of fees, you obviously haven’t scrutinized a checking account agreement in too much detail.  These so-called maintenance fees are epidemic and tough to detect.  In fact, when WalletHub did its study in 2014, it found the variance in disclosure policies made it hard to determine the precise number of fees associated with each checking account, but most banks fell in the 20 to 40 total fee range, with some reaching almost 50.   More frequently, the banks will disclose some of the higher profile fees  (overdraft, ATM) but decline to offer information about the less frequently imposed fees.

The most common is the overdraft fee and it ranges from $15 to $35. Overdraft fees, also known as NSF, or nonsufficient funds fees, hit bank customers a little harder than they did a year ago. The average fee for an overdraft — paid when a bank processes a check or debit card purchase an account holder doesn’t have the funds in their account to cover — is now $33.07, up 1% from last year.  You can avoid overdraft fees by:

  • Setting up text alerts to let you know when their balance falls below a certain amount. Getting a low-balance text may be enough to help you stop swiping your debit card in time to avoid overdrafting.
  • Try linking a line of credit or a savings account to your checking account to cover overdrafts. You still may pay a fee for the service, but it would be cheaper than an overdraft fee.
  • Federal regulations require banks to let customers opt out of overdraft on debit cards. For most people, having their debit card declined when they don’t have the money to cover a purchase is preferable to incurring a string of overdraft fees.

When you realize that a $3 latte sent your account into the red, triggering your $35 overdraft protection, your coffee’s not going to taste so hot. With no overdraft protection, your card would have been politely declined, but that’s better than being saddled with a $35 fee. Your card also will be turned down at the ATM if there aren’t enough funds in your checking account to cover your withdrawal. Overdrafts are just the tip of the iceberg, too. Here are some of the sneakier fees that come attached to your standard bank account — and how you can make sure they don’t deplete your savings.

ATM fees are also common, although many of the online banks are no longer charging for ATM transactions.   Just because you open a no-ATM-fee checking account doesn’t mean you have to abandon your current checking account. Simply use your no-ATM-fee checking account for out-of-network ATM cash withdrawals. You have other means to avoid ATM fees, as well. You can use MyBankTracker’s mobile app to help you locate a nearby in-network ATM. Then, there’s always the option of asking for cash back after swiping your debit card at a retail store. But, keep in mind retail stores have a limit on how much you are allowed to withdraw. Also, if you find yourself constantly running to an ATM for a variety of transactions, you should consider switching to a bank that offers a larger, more convenient ATM network.   Here are some other, lesser known, “maintenance fees” and ways to work around them:

1. Reordered Overdraft Fees

According to a 2014 survey from Pew Charitable Trusts, almost half of all major banks “reorder” checking account transactions so that they post by size, not the order in which they were made. For bank customers who are susceptible to overdrawing their accounts, this switch could cause one overdraft charge to balloon into three or four.Banks that employ this practice (almost all of the major ones except for Citibank) say they do this so that larger and more important expenses like mortgage payments clear first. The actual result is that consumers overdraw their accounts sooner and more often, with each subsequent overdraft racking up another 30-something dollars.If you overdraw your account because of posting order, your best bet is probably to appeal the charge to the bank — although appealing any kind of bank fees can be tough, said Warren Taylor, president of BankMobile. “If one carries high balances, some banks will negotiate the fees with you — but most banks require their branches to keep 92 to 98 percent of fees charged,” he said. “If you don’t have a lot of money, you are in trouble. You can appeal to the regulator of the bank or the CFPB to intercede on your behalf if you feel the fees are abusive.”

2. Big Deposit Fee

Here’s a crazy one: some banks have started charging their biggest customers fees for parking large amounts of cash in their accounts.   In other words, if you give the bank too much money, it’ll charge you.  It’s basically the opposite of a minimum balance fee and it’s wholly avoidable. If you’re wealthy enough for this to be an issue, you shouldn’t be keeping all your cash in one account anyway; the FDIC only insures total deposits at a single institution for up to $250,000 per depositor. Our advice is if you are rolling in cash, you should keep your money in a number of safe, low-cost, long-term investments, like index funds. If you’re saving for a specific goal — such as retirement — you probably want to park your savings in a specialized product, such as a tax-advantaged Roth IRA or 401(k).  Don’t put anything above $250,000 in the banks……and deposit it in small increments to avoid this stupid fee.

3. Early Account Closure Fee

Banks began charging a fee for closing account within months of opening after 2011’s first Bank Transfer Day, in which hundreds of thousands of former bank customers closed their accounts and joined local credit unions in protest of — yep — predatory fee structures. The amount of time required to keep an account open and the fee charged if you don’t can vary by institution, but in general, this expense can be pretty hefty, around $25 to $50 at most major banks.

4.  Stop Payment Fee

A compelling reason to not make direct payments from your checking account….or your debit card…is the ridiculous amount of money banks will charge to stop the payment of a check or debit charge.  In Bank of Internet’s case, it was $35.   A way to avoid this is to make any revolving payments from a credit card — credit card carriers don’t impose “stop charge fees”.

5. Returned Mail Fee

If you move, don’t forget to fill out a change-of-address form online or at your local post office. If your bank statements are sent back marked “return to sender,” you could incur a fee, usually around $5, which banks say is justified because returned mail often triggers extra fraud protection.You can also avoid this charge by going paperless completely and opting for e-statements, a choice your bank might even reward you for with a higher interest rate or waived service fee. (Banks are fans of paperless correspondence too, because it means they can save money on postage costs.) Check to see if your financial institution offers any incentives for making the switch.

6. Minimum Balance Fee

They’re usually not even hidden in the fine print, but these charges can easily sneak up on you, especially if you change your depositing habits. Most bank accounts have a minimum balance threshold you have to clear in order to waive a monthly service fee — say, $1,000 to avoid a $12 recurring expense. Often, the higher the interest rate on the account, the higher your minimum balance requirement, though many institutions also waive the charge if you have a regular, automated incoming deposit. Like many fees, these kinds of monthly service charges are the hardest on depositors with less reliable income streams.  The solution in this case is to find an account with a low minimum balance requirement or a monthly fee that’s more easily waived; some accounts will let you duck it by just signing up for e-statements. But if you don’t want to switch accounts or banks, there might be a few creative ways to get around the charge.  Another creative work-around:  take money from your Paypal account and withdraw it into your bank account every month.

7. Transfer Fees

If you have accounts at two different banks and you want to move money between them online, you’ll first want to know whether this kind of Automated Clearing House transfer will cost you a fee. ACH transfers refer to various money transfers, including direct deposits of your paycheck and person-to-person payments. While banks generally don’t charge for those, when you want to send money to yourself through what’s often called an external funds transfer, fees sometimes come into play.  There’s a trend of online-only banks such as Ally Bank and Capital One 360 not charging for these types of ACH transfers.  PayPal also offers free transfers from and to banks.  These banks have an incentive to make them free since paper checks and cash deposits can be difficult for online banks to deal with.

Ultimately, we recommend that you try to find online banks that don’t rely upon gimmicks.   A discussion of these preferable checking accounts can be found at our Gimmick-Free blog.   And a new app will also help you find the best checking account for you.   After all, the best way to show your dissatisfaction is to take your business somewhere else.   That sends a message that even banks will get…..eventually.   And if you have been subjected to bank fees that you believe to be unfair or misleading, we strongly recommend that you file an online complaint with the Consumer Financial Protection Bureau.   It takes but a few minutes but has proven to be very effective in forcing banks to return any contested fees.