8 common banking fees and how to avoid them

Maintenance fees

FEE: $5 to $15 per month

Maintenance fees (aka, service fees) are charged to cover the costs of routine work financial institutions do to maintain your account. These fees are usually charged monthly; however, some institutions waive them if you meet specific requirements.

“You can often avoid (maintenance) fees by maintaining a minimum balance or using direct deposit instead of checks,” said Anthony Martin, CEO of Choice Mutual. “Also, check if your bank offers a no-fee account. There may be some conditions, but you could save money in the long run.”

Your bank account agreement will specify the types of fees you might have to pay, what they’ll cost and what you can do to avoid them. Some common ways to avoid fees are:

• Maintaining a minimum balance
• Setting up a recurring automated clearing house (ACH) transfer
• Automatically transferring money to your savings account
• Having other accounts with the same institution

It’s a good idea to ask about these fees and potential waivers before opening an account.

» MORE: 10 questions to ask before opening a checking account

Out-of-network ATM fees

FEE: $3 to $10 per transaction

Some financial institutions charge fees if you use an ATM outside of their network — meaning an ATM other than the ones your bank owns or partners with.

Gates Little, president and CEO of The Southern Bank Company, said: “This (fee) is super frustrating and can really add up over time. If you use an ATM that isn't tied to your bank, you will be charged a service fee. Usually, you’ll be charged anywhere from $3-$10 at the machine, and you could be charged on your bank's end too!”

Always have cash on hand “to avoid needing to use the nearest ATM,” said Little. “You could also do cash back, which is offered at many drug stores and grocery stores. Even if you have to buy a pack of gum or something, you are getting something for that $3 you would have spent at an ATM instead of just being charged to access your own money!”

Overdraft fees

FEE: $25 to $35 per transaction

Connect a savings account to your checking account if allowed by your bank. Money will be automatically pulled from your savings if a transaction takes your checking balance below $0.

You’ll incur an overdraft fee if your account doesn’t have enough money in it to cover the transaction you’re trying to process. You have to opt in for the bank to approve overdrafts that arise from using your debit card. Otherwise, you can’t be charged an overdraft fee for these transactions — but your card may be denied.

“This usually occurs unintentionally, like forgetting that a bill came out of your account so you spend money that isn't in your account anymore,” said Little. “These fees can be hefty at some banks, and even if you have overdraft protection, you're going to be charged a fee of $25 to $35 per overdraft transaction.”

You can prevent this from happening, explained Little, “by using your online banking app to keep track of your (bank) accounts on a daily basis. You can also opt in to notifications when your account balance is low, which will help you avoid accidental overdrafts.”

» MORE: How to manage your money

Insufficient funds fees

FEE: On average, $34 per occurrence

Insufficient funds fees, or NSF fees, are similar to overdraft fees. However, overdraft fees apply to debit card transactions, whereas NSF fees apply to overdrafts caused by other transactions, such as checks.

There is no opt-in feature for NSF fees. The best way to avoid these is by ensuring you always have enough money in your account to cover your transactions.

Additionally, you can search for a bank that doesn’t charge NSF fees. Many banks have chosen to eliminate NSF fees in an effort to protect consumers from exorbitant costs.

Foreign transaction fees

FEE: 1% to 3% of the purchase amount

A foreign transaction fee applies to transactions outside of the country where your bank account is located. So, if you have a bank account in the U.S., you might incur a foreign transaction fee for money you spend while traveling in Europe or Asia.

While foreign transaction fees commonly apply to credit cards, you might also need to pay similar fees to process debit card transactions.

You can avoid foreign transaction fees by looking for a checking account that doesn’t charge them or getting a credit card with no foreign transaction fees.

Excess transaction fees

FEE: $3 to $25 per transaction

Some banks charge excess transaction fees if you process more than a specified number of monthly transactions. In many cases, the limit is six monthly transfers or withdrawals from a savings account.

Excess transaction fees aren’t charged by every bank. Plus, while banks were previously required to limit transfers or withdrawals from a savings account to no more than six a month, this rule was suspended in April 2020.

Banks now have the discretion to create their own transfer or withdrawal rules or to eliminate them altogether. Your bank account agreement will specify if this fee applies and how much it costs.

Wire transfer fees

FEE: $15 to $30 or more

A wire transfer fee covers the costs of electronic funds transferred from your bank account to a bank account at another financial institution. You can easily avoid this fee by using a different method, such as checks or ACH transfers.

Wire transfers are sent directly from one bank to another, whereas ACH transfers are processed through an intermediary. Although both types of transfers can happen as soon as the same day, wires are often processed much faster than ACH because there’s no intermediary. But you’ll usually pay a lower fee for an ACH transfer versus a wire transfer.

Incoming ACH transfers like payroll deposits are usually free, and you might even earn maintenance fee waivers if you set up recurring ACHs. An outgoing ACH transfer might cost as little as $0 to $3 per transaction. In contrast, you might pay $30 or more for a wire transfer.

Inactivity fees

FEE: $5 to $20 per month

An inactivity fee (aka, a dormancy fee) is charged when there’s been no activity in your bank account for a certain amount of time. Thankfully, many banks don’t charge inactivity fees.

After your bank account has been inactive for a long period (typically three to five years) and there has been no customer contact, the bank may determine the account is abandoned and turn the remaining money in your account over to the state.

While the rules about abandoned accounts vary by state, your bank will typically send you notices that it’s planning to consider the account inactive. You can usually contact your state treasurer’s office to see if you have any abandoned property on file and, if so, to claim the funds.

Bottom line

One of the ways some banks make money is by charging fees on your accounts. The institution must disclose the fees you might be charged, how much they’ll cost and what activities trigger them. You can avoid fees by choosing a bank account with little to no fees or by reading your account agreement.