How to Avoid Bank Fees

Q: Why do banks charge so many fees?

Bank fees help banks make a profit and to put toward their overhead costs and administrative fees. Besides earning interest and fees on loans and other financial products, bank fees are a way for banks to earn money.

Q: Do all banks charge monthly fees?

While some banks charge monthly maintenance fees, some don't. It's a good idea to check and see if a bank charges a monthly maintenance fee. If they do, there's usually ways you can get this fee waived.

Q: How do you get bank fees waived?

Depending on the bank fee, there are ways you can get those bank fees dropped. For instance, you can opt out of paper statements to avoid a monthly charge, or you can sign up for multiple accounts or keep a minimum balance to get the maintenance fee dropped.

Jackie LamUpdated June 6, 2023

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Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or partners. Read more about our Editorial Guidelines and How We Make Money.

In a perfect world, we wouldn't have to pay bank fees. But just like that bitter aftertaste that comes with coffee, bank fees are a part of life. Bank maintenance fees, overdraft fees, and out-of-network ATM fees can leave a bad taste in your mouth – and leave your wallet lighter. The good news? While many banks do charge fees, they are avoidable. Here's how you can steer clear of bank fees and put more money back into your pocket:

Why Do Banks Charge Late Fees?

Banks charge late fees because they want to encourage their account holders to be on time with their payments. In turn, falling behind means that you'll get hit with a penalty — a late fee. Banks also charge fees because it's lucrative, and it's a way for them to bring in money, put toward their overhead costs, and turn a profit. Late fees vary by the bank or credit union, but can typically be anywhere from $25 to $50. There might be a grace period before the bank charges a late fee. For instance, let's say you take out a mortgage from your bank. If you're late on your monthly mortgage payment, there might be a grace period of 15 days before you're hit with a penalty. Recommended: Reading Your Credit Card Statement

How to Avoid Typical Bank Maintenance Fees

Let's go through some common bank maintenance fees and other types of bank fees and how to hopefully avoid not paying them:

Bank Maintenance Fees

What is a monthly maintenance fee? Also known as a maintenance fee, a monthly maintenance fee is what a bank charges each month in administrative costs to have an account with them. How to avoid it: Depending on the bank, the bank maintenance fee can be waived in several different ways, such as if you keep a monthly minimum balance, meet the age requirements, and maintain some level of activity on your debit card, or open multiple accounts with the same bank. Recommended: Linking Bank Accounts: A Guide

Insufficient Fund Fee

Also known as a non-sufficient fund or returned item fee, if you don't sign up for overdraft protection, and there isn't enough money in your bank balance to cover a purchase, the bank might charge you an insufficient fund fee. How to avoid it: Keep an eye on what's going in and out of your bank account. It might be helpful to know exactly how much your bills are and set that money aside in your checking account. Whatever remains is considered "okay to spend," but it’s best to keep a close watch on your spending. Consider signing up for alerts from your bank that could automatically ping you should your balance hit a low. Recommended: Debit Card Fraud, Explained

Overdraft Fee

When you spend more money than you have and the bank covers it, you could get hit with an overdraft fee. One thing to note: An insufficient fund fee means the bank won't cover your purchase and will deny covering the charge. If you opt for overdraft protection, the bank will cover the purchase — even if you don't have enough funds — but you'll get dinged with the fee. How to avoid it: One way to avoid an overdraft fee is to closely monitor how much is in your bank account and to sign up for alerts. Also, if you sign up for direct deposit, that could help you keep cash in your account. Some money management apps that are linked to your bank account have their own version of overdraft protection. If your bank balance drops below a certain threshold (let's say $500), the money app will automatically transfer funds to keep your balance "topped off" so it maintains that minimum in the account. Recommended: Banks That Don't Charge Overdraft Fees

Wire Transfer Fee

A wire transfer fee is sending a fee either domestically or internationally. Technically, it's when money is sent via a service such as the FedWire Funds Service. If you're the one sending the money, you usually are the one who has to pay the fee. How to avoid it: See if you can send the money in another way: through ACH, which is another type of electronic transfer, a payment platform, or by writing a check.

Excessive Withdrawals Fee

While some banks might've lifted the withdrawal limit of six per month for savings accounts, some still have this restriction in place. How to avoid it: Some types of transfers — such as in-person transactions and ATM transfers – don't count toward this limit. Also, do your best to plan out any withdrawals you do have to make from your savings account.

Out-of-Network ATM Fee

If you use an ATM that's outside of the bank's network to take out money or deposit cash, you might get hit with two fees: one from the bank, and one from the party that owns the ATM. How to avoid it: As these fees can add up quickly, aim to use an in-network ATM. Or, get cash back when you check out at the store. While most retailers accept cards, check beforehand to see if you can use a debit or credit card.

Paper Statement Fee

If you get bank statements mailed to you each month, watch out for a paper statement fee. While the fee is typically a small amount, it can add up over time.How to avoid it: Opt out to paperless statements. You can usually do this by logging onto your account or mobile bank app, and clicking on your preferences. Recommended: How Long to Keep Credit Card Statements

Early Account Closing Fee

Should you close your bank account shortly after you open it, the bank might ding you with what's known as an early closing fee. Each bank has a different period of time you need to keep your account open to avoid incurring this penalty. How to avoid it: Keep your account open as long as you need so you don't get hit with an early closing fee. Check the bank's rules so you don't accidentally shutter your account before the time frame. Recommended: Business Bank Account Versus Personal Account

How to Prevent Fees in the Future

To avoid incurring fees in the future, stay clued in on what exactly your bank's fees are and what kind of penalties you might get hit with. Then do what it takes to steer clear of these annoying bank fees. If you're thinking about opening a savings account, check to see what the fees are. Look for banks that offer no or low fees. For example, some banks offer no monthly bank maintenance fees, or a number of free out-of-network ATM fees each month.

The Takeaway

Bank fees are a part of life – but they can be kept to a minimum or avoided completely. By doing your research and checking what the fees are, you can navigate around them, or choose a bank that doesn't have many fees. In the market for a bank account? If so, Lantern can help you do your homework and find a savings account that offers low or no fees, and is a good fit for you.

Frequently Asked Questions

Why do banks charge so many fees?

Do all banks charge monthly fees?

How do you get bank fees waived?

Photo credit: iStock/PeopleImages

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About the Author

Jackie Lam

Jackie Lam is a freelance writer with experience covering small business, budgeting, freelancing and money, and personal finance. She has written for more than 60 outlets, including Salon.com, CNET, BuzzFeed, Business Insider, and Time's NextAdvisor. She is currently working on her AFC® financial coaching certification to help artists, freelancers, and small businesses.

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