How to Avoid Bank Charges

Bank charges come in many forms and can be very confusing. Especially if you are unsure of how you are incurring them. Fortunately, there are a variety of ways to avoid being charges to death by your bank and keep more of your own money. Having worked as a personal banker for one of the nations largest banking firms, I will share with you the many different forms of banking fees, and the ways to avoid them.

When it comes to banking fees, perhaps none are more frustrating than the overdraft fee. Overdrafts are incurred specifically when you have drawn more money from your account than you have availible. An example would be using your check card to purchse $50.00 worth of gas when you only have $30.00 availible. Typically, if the purchase is made by debit card, the charge will be approved as long as it is within the limits of your card. This means that the bank is obligated to pay the institution in which the purchase was made. In exchange for providing this service to you the bank then charges you a fee (overdraft) of anywhere between $25 and $35 dollars. The amount charged varies from bank to bank. For example Wells Fargo charges $33.00 per incident while Washington Mutual charges only $25. The most infuriating part of overdraft fees is that the fee is the same regardless of the amount of the purchase. A five dollar charge or a five hundred dollar charge carries the same overdraft fee. Also, each charge is considered independant; therefore each purchase carries its own overdraft fee which can quickly add up to several hundred dollars.

Overdraft fees can be avoided simply enough with a little money management. You must be very careful to make sure you're aware of your balance at all times and put off non-essential purchases until you can afford them. Of course, everybody miscalculates from time to time and comes up a little short through no fault of their own. Fortunately, many banks offer what is known as overdraft protection to their customers which can typically save a consumer hundreds of dollars per year in fees. When signing up for overdraft protection, you will have a few options to choose from. The most typical is the savings account option in which you use your savings account to provide extra funds towards your primary account when needed. Though there is still a fee assessed when this service is utilized, the fee is typically much lower than the $25-$33 per incident charged and with overdraft protection in place a fee will only be charged once per day as opposed to a separate fee for each individual purchase. Other options include linking your credit card to your primary account, and, in the event your primary account overdrafts a cash advance will be made from your credit card to your primary account to cover the difference. The drawback to using this kind of service, however, is that instead of your typical APR you will be charged the cash advance APR which is typically around 24%. If you have a home equity line of credit with your bank, you may also be able to link this service to your primary account as overdraft protection to avoid overdraft fees.

Returned check fees are similar to overdraft fees in the sense that they are incurred when you don't have enough money in your account to cover the amount of your purchase. However, the difference between overdraft fees, which will only be charged once per incident, the returned check fee can be charged several times. This is due to several factors. One being that the check is returned to the institution to which it was written allowing them to resubmit it many times in an attempt to collect the debt. Also, many businesses have began using electronic checks which is simply the conversion of your paper check to an electronic form which allows for faster processing times. This also means it can be resubmitted to your bank several times over in a shorter period of time. And each time the check is returned, there will be a fee assessed. The best strategy to avoid these fees is the same as overdraft fees. Simple money management and having overdraft protection in place will alleviate many of the returned check charges.

Other fees one can incur from their bank may include: account maintenance fees, research fees, statement fees and the list goes on. Banks generate the majority of their revenue from charging these fees to customers and are therefore unlikely to stop any time soon. However, it is possible to avoid even low level fees such as account maintenance fees. For example, check with you bank to see if they will waive your account fees with direct deposit. Or with a monthly automatic balance transfer between checking and savings accounts or maintaining the minimum necessary balance. Also, you can avoid many payment processing fees when using your online banking feature to make payments. Your best resource to learn about the fees added on to your account will be your personal banker at your local branch. Generally, they are more than happy to explain the fees and ways to avoid them.