Avoiding those Pesky Bank Fees

We have all read about the ever increasing fees and charges that banks and other financial institutions charge us on our everyday savings and checking accounts. But how well do you know the various bank fees and how much you could be charged? A recent government study on bank fees revealed that consumers are ill-informed about the fees they are paying on their accounts and tend to pay more than then need to. In the US alone, $36 billion in bank fees were charged last year to consumers. In Australia, the estimate is about $3 billion. While bank fees are not going to go away or lessen anytime soon, savvy consumers can avoid a number, if not all, of these fees by being informed and shopping around for the best deals. Here are some of the more common bank fees/charges and tips to avoid them.

Monthly Account Keeping or Service Fee : The most common fee you pay for an organization to manage your bank account. Generally runs anywhere from $3 to $7 per month ($36 - $84 annually). However, you can search around and find ways to avoid this fee by finding a zero fee account or meeting some no-fee requirements like having a certain account balance or home loan with the bank. For example, I have a transaction account with HSBC Australia that does not charge a monthly fee and offers a high rate of interest. I can also withdraw money for free from any ATM up to 5 times a month. In the US, I have a bank account where if I directly deposit my paycheck I get my monthly fees rebated back to me. I have found that the mid-tier or newer market entrants have the lowest or no fee accounts.

Internet Banking fee : A fee may be charged for doing transactions over the Internet (0.50c to $1 per transaction). If you are paying this, then choose another account or bank. Most banks do not charge a Internet fee for transaction accounts, especially if you are already paying a monthly account keeping fee. In fact banks are encouraging consumers to use the Internet as it is the cheapest and highest returning channel for them.

ATM transaction fee : When using your ATM card, you may be charged a fee if you exceed the number of transactions nominated for a particular time frame (e.g. per month) or use an ATM from a different bank.The fee for this can range from $2 to $5. Again, this is an easy fee to avoid with some forward planning or withdrawing cash via free EFTPOS when doing your grocery shopping or at the fuel station. You can also select an account that allows some non-bank ATM usage or rebates you for any ATM fees incurred. There are plenty of options out there.

Foreign ATM fee : If you use an overseas ATM, you may be charged $3.00 to $7.00 for withdrawals. This one is especially applicable to me as I work/travel and live overseas. Ironically, the cheapest way to get money overseas is to use an ATM withdrawal. You get the best exchange rate and even with the ATM fee, this is cheaper than any other currency exchange method out there (more on this in another post). So I would say this a fee worth incurring when travelling overseas, and one you really can't avoid.

Branch withdrawal fee : Dealing with a person face-to-face can sometimes cost you money ($5 - $10). This one is for those folks who like personalized service and are willing to pay for it. For most of us, we can avoid this by doing most of our banking on-line or via the telephone. If you do want the face-to-face interaction choose a bank account that provides a certain number of these interactions for free.

Cheque withdrawal fee : A fee to produce a cheque is often charged. Find out how much this is before you need to do this so you are aware of this cost. Generally runs from $0.50c to $1 per cheque. With a host of other payment options out there like BPay or direct transfer, paying by cheque is getting obsolete - as should the fee for you.

Dishonour fee (or Overdraft fee) : The fee you pay when the balance in your everyday transaction account goes below $0.00. Example: Your phone provider debits $150.00 for your monthly bill but you only have $100 in your account at the time. You may be charged anywhere from $30 to $50 by your bank. I have been hit by this one - so make sure you keep a buffer (e.g. $500) in your transaction account so that you have sufficient funds to cover these situations. If you are expecting a big debit, make sure you transfer money into your account well ahead of when its due.

Exceeding your credit limit fee : A fee may be debited from your credit card account every time you exceed your credit limit during a statement cycle e.g. $35 per statement cycle. Another bad fee which you can avoid by watching what you spend. At worst case increase your credit limit or get multiple credit cards so that your credit limit is higher - but higher credit has its own inherent dangers.

I am sure there are many other fees out there, but these are the most common ones consumers face. It would be interesting to hear of any adverse fee experiences you have had and/or lessons learnt by leaving a comment on this post. My worst one was paying a $30 overdraft fee when I forgot to move enough money from my savings account to my transaction/checking account before a big bill came through. That was $30 wasted, which with a bit of forward planning I could have avoided.

Financial institutions must provide information to their customers on these fees and charges. So if you are getting charged for something you did not know about, make sure you raise this with your bank. With the credit crisis causing a lot of pain for bank earnings, they will look to other ways - like bank fees - to make up for these losses. So be on the watch out for increasing fees and shop around to get the best deals that suit your banking needs.

Photo from thinkpanama