Bank fees might be the single most annoying part of having a checking or savings account. Sometimes they're hidden and sneak up on you, other times they’re blatantly up front, just taunting you. But in all cases, when you see one of those fees on your monthly statement, you get annoyed. Maybe even angry.
A recent CNN Money article showed that in 2016 alone, the top 3 big banks (Wells Fargo, JPMorgan Chase, and Bank of America) charged consumers over $6.4 billion in bank fees.
So what gives? Why are banks fees so rampant?
A big reason is — and there’s no way to sugarcoat this — banks are out to make money, and if they can charge a few dollars here or there, they will. Most banks are a business, and businesses are all about their bottom line.
To understand the "whys" of fees, it might help to drill down to consider some of the most common fees you're likely to see.
Minimum balance fees
Different banks have different policies when it comes to how much you need to have in your checking or savings account. A lot of times, this is done to encourage you to deposit more money, which in turn gives the banks more capital to work with and grow their business.
While this fee makes sense from a business standpoint, it fails to take into account the financial hurdles many American's face today. With 7 out of 10 American's holding less than $1,000 in their savings account, it's easy to see how a minimum balance fee could send someone who's already struggling financially into the red.
Many banks charge a monthly maintenance fee in order to cover costs associated with maintaining accounts and certain perks that may be added on. Some of these perks include: overdraft coverage programs, no charge for using ATMs outside the system, cashback on spending, and so forth. A number of these perks cost the bank money, this is one way they cover those costs.
To see if your maintenance fee makes sense for your financial situation, look at your account and do some simple math to see if the perks outweigh the fee. If you aren't receiving perks on your account, it may be time reassess your bank account.
If you're ready to ditch banking fees altogether, this is the checking account for you.
It's somewhat uncommon to find yourself in a cash-only establishments these days, but when it happens, that ATM fee stings.
It's important to realize there are two types of ATM fees. Oftentimes, you'll incur fees from withdrawing money from an ATM because the machine is owned by an organization separate from your bank.For example, a gas station ATM. This organization has set up the machine as a way to make money. This is called the "surcharge fee."
In addition, your banks may charge you a fee on top of that as a passive aggressive way to encourage you to use one of their own machines and branches. This fee is called the "foreign" or "transaction" fee.
If you're ready to ditch ATM fees altogether, take a look at this list from NerdWallet on ways to avoid them.
In terms of bank fees, an overdraft charge is probably the heftiest. Unlike the other fees that you can avoid by finding a legitimately free checking account, overdraft fees cannot be avoided.
So why do you get charged $25 for a $2 overdraft? Think of it this way: By putting forward the money you don't have, the bank is essentially giving you a loan. The overdraft fee is the processing fee.
To avoid overdraft fees, work on building yourself a solid financial cushion by automating your finances. Automate both your bills and your savings. From there you'll have a clear idea of what money you have left over each month. You can also get int he habit of checking your online statements daily. Not only will this help you avoid overdraft charges, but it will keep your money goals top of mind.
Understanding the reasoning behind bank fees may not help when it comes to easing your frustration over them, but hopefully it clears up some confusion.
Now that you have all the information, you can find a bank account that fits your wants and needs. If you're ready to ditch those fees for good, consider a Kasasa account. We offer (actually) free checking/savings accounts, that pay out rewards each month, as well as, refund your ATM fees.