How Keeping Bank Fees Down Can Reduce the Cost of Banking
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Even though many banks offer customers free banking accounts, keeping bank fees down can be difficult. Because banks charge fees for services, this usually increases the cost of banking. Fees for services like overdraft coverage, returned checks, and ATM usage can quickly add up.
When Did Banks Start Charging Higher Fees?
Bank fees have steadily been on the rise since the deregulation of the banking industry during the 1980s. When the savings and loan crisis led to economic turmoil, many banks lost business from wealthier customers. Consequently, with the decline in business from wealthy customers, banks had a difficult time offsetting the cost of keeping less wealthy customers. While banks began offering more services, they also began earning significant revenue through non-interest income like bank fees.
What Kinds of Fees Do Banks Charge?
Coinciding with the increase of services has been the increase of bank fees. Many banks charge for the following services:
- Overdraft protection: Banks charge overdraft protection fees for honoring charges that exceed the amount in a customer's bank account.
- Bank transfer: A fee charged for the transfer of money from one bank to another bank.
- Credit reference: A fee for providing a third party with information about a customer's creditworthiness.
- ATM access: Fees for using another banks ATM machine.
- Coin counting: Some banks charge a fee for counting coins.
- Teller fee: Some banks limit or charge a fee for interacting with tellers.
- Safe-deposit box: Customers can store items in a safe-deposit box for an annual fee.
- Money order/cashier's check: Payments made to third parties by money order or by cashier's check are subject to a fee.
- Maintenance: Fees charged by the month or year for the maintenance of an account.=
Best Ways for Keeping Bank Fees Down
Since incidental fees can add up, keeping bank fees down can be an important consideration when deciding where to open a bank account. As you begin researching your options, it is important to determine the purpose of the account. For example, is the goal to save money in an interest-bearing account or is it a checking account used to pay bills. Consider the following when choosing a bank:
- Will you use the ATM frequently? Choose a bank with an ATM nearby in order to cut down on the cost of using another bank's ATM machine.
- Will you bounce checks? If so, open an account with overdraft protection. Overdraft fees can quickly add up, but cost less than bouncing checks.
- Will you write a lot of checks? A free checking account that offers unlimited check writing will eliminate charges for exceeding check writing limits.
- Will you conduct most banking face-to-face? If you plan on using bank tellers for most banking needs, choose a bank with unlimited access. Consider a community bank or a credit union.
- Will you keep a minimum balance? If you will maintain a certain balance, consider a bank that offers free services to customers that keep a minimum amount in the account.