Charging ongoing fees seems to be the standard revenue model for so many businesses today and banks are no exception. ATM fees and monthly charges just to have a checking account are common. Occasional fees don’t appear to be that big of a deal. However, the costs start to add up fast when looking at an entire year of banking expenses.
Today’s technology and choices for banking make it much easier to find one that offers great service but without all the hidden fees or ongoing charges. There are alternatives to the mega fee big banks that only have their profits and shareholders’ interests in mind.
If you are paying high recurring fees for banking services, stop wasting your money.
Fees Add Up
It can seem like it isn’t that big of a deal to pay small fees for banking services. This is what they are counting on. A few dollars for taking some money out of an ATM or just a little cost for a monthly checking account maintenance fee. The problem with small ongoing fees is eventually they add up to a fortune over time.
According to a 2019 checking account and ATM fee study by Bankrate, the average total ATM fees are now approaching about $5 on average. This is the cost for a person to just withdrawal some of their own money from the bank. Now, take this cost three times a week. That comes out to $15 dollars a week, $60 per month, and $720 per year!
It’s not just ATM fees that start to add up with banking. Maintenance charges for checking accounts not meeting a monthly minimum balance requirement are now an average of $5.61. In addition, an account overdraft could cost as much as $35 or more.
For someone as an example with $60 a month in ATM fees along with a monthly checking account fee of $5.00, this comes out to a total of $780 per year. Take this $65 per month and save it at just .09% annual interest for just 5 years. The result is $3,907.03. Saving those same charges for 10 years and the outcome is $7,831.67.
Saving bank fees can add up to thousands of dollars in just a few short years.
Why Do So Many Banks Charge Fees?
I understand banks are a business. They have overhead that needs to be covered. However, inflated executive salaries and profits for shareholders are not something that I personally want to contribute to and neither should you. Banks take in billions of dollars every year related to fee income.
Part of the need for banks to charge fees is to recoup costs associated when there are lower interest rates. Because interest rates have been decreasing for some time now, it should come as no surprise that fees on ATMs alone have been increasing 4.25% annually over the last 21 years, according to the study by Bankrate.
For the megabanks answering to shareholders, fee income is a necessity. Big banks might sometimes have more convenience, but they also generally have higher fees and more of them. Compared to a lot of smaller banks and credit unions the megabanks generally take the top prize in feeing their customers to death.
Big banking institutions do have more overhead to cover, but they also often need to answer to shareholders. This environment only adds to the need for finding ways to increase the bottom line not to mention the demand for paying outrageous CEO and executive banker salaries. Again, I understand people need to be compensated for their work, but you only need to look at some of the biggest bank CEO salaries to not get a little upset about ongoing fees.
Paying monthly checking account and ATM fees is not something I want to personally do while contributing to CEO pay totaling more than 300 times an average worker at that same institution.
Fees can be a necessary form of revenue for banks to cover costs and keep the doors open, but they can also be a tool for generating more profits. With today’s technology and cost-cutting environments, customers should not be paying sky-high monthly fees to a bank.
Banks Should Not Be Feeing Customers to Death
As I mentioned, I understand banks need to make money to cover their costs. Yet, a lot of them have been cutting their overhead while at the same time consistently raising their fees. Not only have the fees increasingly been rising but so has the deposit requirements to avoid them.
Banks make money off fees, but also from the money people deposit with them. They are in the business of taking deposits from customers and then that money is borrowed by the bank to lend out to other customers. Just by putting your money in the bank, they are already making some money. It does not make sense to pay a bank to make even more money off the money you already let them borrow when the fees they charge become unreasonable.
Through the help of technology, more banks are cutting costs while increasing their ongoing customer charges.
Staff is Being Cut
The ability for more customers to do all their banking online, at an ATM or by driving through is cutting overhead costs for staffing. Fewer workers are needed for a bank lobby and customer service. These cutbacks are being made while banking fees are steadily rising.
With the current Corona Virus pandemic, more banks are moving to even less lobby hours and encouraging more online transactions. This is likely only going to lead to further bank staff reductions. Don’t look for a drop in fees as a growing number of people are expected to be laid off in the future.
There was a time when it was a necessity to stand in line for a bank teller. These days have been gone for some time now. The workers have been feeling the slow reductions in available jobs and the trend is only going to continue.
Fewer Bank Branches
Technology has been replacing several banking jobs that were once held by actual people for some time now. In addition, fewer branch locations are becoming a trend which largely reduces operating costs for real estate. No longer is there quite as big of a need for large office buildings with banking lobbies.
Today there is a growing number of banks that are completely online. With the help of the internet, there isn’t even a need to leave the house to deposit a check or transfer money. Fewer banking locations equals less overhead expenses. The result is not as much money required for upkeep.
A smaller number of locations is becoming much more common for several banks. They are reducing their costs while gradually feeing their customers to death more and more.
The reductions in banking branch locations and an increase in bank choices that are available completely online have made the monopoly on bank fees no longer a requirement. There are some good banking options available today to avoid paying high recurring fees just to put your money in the bank.
If you are currently paying frequent fees to bank, it’s time to stop wasting your money. Do some research on better alternatives to potentially put hundreds or thousands of dollars back into your account.
How Can You Reduce or Completely Remove Bank Fees?
There are ways to either reduce or completely do away with recurring bank fees. Two of the most common fees are from ATM withdrawals and monthly checking account maintenance fees.
With average ATM withdrawals now costing almost $5 per transaction, this is a big waste of money that should be either eliminated or reduced. Taking money out of an ATM and getting charged to do it always bothers me to this day. It should also be something that makes anyone else wanting access to their own money just a little annoyed.
So, let me get this right. I must pay a fee to take my own money out of a bank account? The idea itself doesn’t sound quite right to me. Okay, maybe there should be a convenience fee of some kind. However, a $5 fee? That sounds excessive at least to me.
You can cut down or eliminate ATM fees by going cashless whenever possible. Using credit cards for most transactions can be dangerous territory, but with the help of a debit card going cashless a good amount of the time is a possibility.
A debit card can also be used in place of an ATM for getting cash. Instead of using the ATM when you have a need to pick up some groceries, use a debit card, and get cash back. More stores are offering a cashback option when making a purchase and it can be an easy way to avoid unnecessary fees.
Only Your Bank’s ATM
Using only your bank’s ATM whenever possible is another way to avoid ATM fees. This can be challenging for some smaller banks with few locations. But many of them are on a network that participates with other institutions. Research how money can be taken out of an ATM before choosing a bank.
There are some banks that will reimburse their customers for ATM fees. This can be an advantage of being a client with a bank that offers this. However, it is important to look at all the fees a bank might charge to ensure they are not making up for ATM reimbursements someplace else on the recurring fee schedule.
Checking Account Fees
Checking account monthly maintenance fees are one area that should be able to be completely avoided today. If you are paying a monthly fee to deposit your money in a checking account, look for another bank. There are times when an ATM fee might just not be avoidable, but ongoing money spent to just have a checking account is not something anyone should be doing. This is wasted money because there are ways to avoid the monthly checking account fee.
Most banks that have a recurring monthly fee for a checking account do have a balance requirement to waive the cost. Some banks might require a minimum balance of $1500 a month while others may only want as little as $100.
If you have the money to carry a monthly minimum balance in a checking account to waive a monthly fee, there should not be a problem finding a bank that will not charge you for a checking account each month.
For someone that doesn’t have the funds to keep a minimum checking account balance to waive a fee, a direct deposit can be a good alternative. There are banks that will waive a monthly checking account fee with customers that have direct deposit.
Because most companies and small businesses today no longer pay people by physical check and only use direct deposit, qualifying for waiving a monthly checking account fee at a bank that offers this should be easy. The average minimum deposit at the top 10 banking institutions is $468.75, according to Banktracker.com.
A bank that offers, for example, $500 a month in direct deposits to waive a monthly checking account fee would only be a couple $250 deposits. This should be able to be accomplished by most working people.
There Are Other Ways to Avoid Monthly Checking Account Fees
Although minimum balance requirements and direct deposit minimums are common ways to avoid recurring checking account monthly fees, there can be additional conditions for eliminating those costs.
It is not uncommon for banks to try and win customers by offering free checking to college or high school students. This is a way for them to acquire new clients they hope to retain for some time. Also, removing checking account fees for people that reach retirement age allows banks to take dependable fixed income deposits from retirement accounts and social security. Banks know this and want those recurring deposits.
Insufficient Funds Fees
There isn’t much that can really be said about spending more money than you have in a checking account. It is important to keep good records of deposits and withdrawals.
Most banks will offer overdraft protection on a checking account. The problem is they will charge a fee and it could be $30 or more for overdrawing a checking account. Not only will it be expensive, but it can lead to legal or credit trouble.
If you are a person that tends to not keep good records and you know you will possibly spend a little more than you might have in your checking account, it’s a good idea to link something like a savings account that can pay the difference. This could avoid an insufficient funds fee or at the very least minimize the cost.
Most banks also have alerts that can be set up on a checking account. If there is an option to have a notice sent to you when your account balance is getting low, this would be a good choice for a person that might withdrawal more money than they have.
The bottom line is just don’t spend more money than you have in your checking account. This will avoid the insufficient fund fee.
Choosing a Bank
To avoid paying excessive banking fees it is important to choose a bank that is right for your financial needs. Choose one that offers good service at minimal or no cost to you. Bank with a company that sees you as their customer and not just a dollar sign of fee income.
For a lot of people, it is a challenge to find a good bank, but it shouldn’t be that difficult. My view is to avoid the megabanks. You know who they are. The companies that have deep advertising and marketing budgets. These are the banks you see on every other block and in several shopping malls within the same city.
Some of the largest banking institutions are also the most unfriendly when it comes to ongoing fees. It is best to keep away from them. They are only in business for their executive pockets and shareholders. It doesn’t take long to do a search on the internet for some of the biggest banks and find major complaints, fines, and fraud.
A Better Choice
Although there might be a few decent choices with big banks left when it comes to avoiding fees, the better selection is often an online-only bank or a local credit union.
Online Only Banking
There is an increasing popularity of online-only banks. The advantage of banking with a business that has no physical locations is the reduction in overhead expenses they have. This is most often passed back to customers that bank with places that only have a presence online.
Banks that don’t have branch locations, drive through’s or actual ATM machines located everywhere can pass these savings back to their customers. The result is most often some of the lowest fees to no fees at all to bank.
Advantages of Online Banking
- Direct deposit
- Electronic check deposit
- Fund transfers
- Pay bills online
- Apply for loans
- Typically, good rates
Online-only banking can not only reduce or eliminate recurring fees entirely, but they tend to also have some of the best rates. You might get a better savings account rate or money market rate. This all goes back to the reduction of overhead expenses.
Online banking really provides the best chance for avoiding fees.
If online banking does not sound appealing to avoid or reduce fees, joining a credit union can be a great alternative.
One of the big differences between a credit union and a traditional bank is its structure for doing business. A credit union operates as a non-profit while a big megabank is for-profit and must answer to its shareholders. This is not to say that a credit union is not in business to make money. They are there to primarily answer to their members.
Credit unions consist of members that are often brought together through an employer, faith, or membership in some type of organization.
Advantages of a Credit Union
- Better interest rates compared to for-profit megabanks
- Reduced or non-existent fees
- Owned by members and run by members.
- Credit unions can make decisions for the benefit of its members and not shareholders.
- Often more friendly and better customer service.
Most of the megabanks and even the better choice of an online bank can have an impersonal feel. One of the big advantages of a credit union is they are often more centered on serving their members. They can have a more personal feeling to them.
It’s not too difficult to avoid excessive banking fees with all the available choices to choose a bank. If you are paying ongoing bank fees, you are wasting a lot of money each month and year.
My experience with banking has been one that has evolved over time. Several years ago, I did bank at a megabank and paid their outrageous fees. The costs started to add up and technology made the switch for me as it evolved. Today I use mostly an online bank for most of my day to day needs and even investing.
The transition to using an online-only bank was easy when I did it and I have never had any major issues. They reimburse me for ATM fees each month, but they even have an agreement with a megabank to use their ATM’s free of charge so I don’t need the reimbursement often.
I also do a little banking with a credit union. If online banking only is not something that appeals to you, try one of your local credit unions. Banks at one time had a very friendly family atmosphere and a credit union might be the last place this type of service exits with a bank.
Avoid megabanks at all costs. They will not have your interests as their primary focus. However, they will place an emphasis on trying to slowly fee you to death in order to increase their profits, answer to shareholders, and enrich their CEOs.
People work hard for their money and it’s important to keep as much of it as possible. Stop wasting money on bank fees.