Guest Post: Frugality in Banking: How to Avoid Those Fees

UnknownHey folks! Today we have a special treat: A guest post about frugality in banking. As you know, this sci-fi author is also a frugal living and FIRE (Financial Independence, Retire Early) advocate, so what Patty from Working Mother Life has written here is something I am grateful to share with readers! Feel free to check out more of her work here: Working Mother Life.

Everyone has to pay common banking fees at least once, but some people may end up paying these charges more often than others. These fees may be as small at times, but they often add up quickly and burn hard-earned cash for habitual infractions.

If you’re a frugal soul, then you’re probably a stark opponent of all banking fees. Luckily, there are plenty of ways to protect your wallet from those fees, and they all involve a bit of responsibility and forethought. Let’s dive into the most common personal banking fees and offer advice about how to avoid them. If you commit these to memory, you’ll have a better chance of keeping your money in savings instead of losing it to the banks.

Monthly Fees

In the modern personal banking scene, many banks charge monthly service fees on checking and savings accounts, but they can also be easy to avoid. There are plenty of banks out there that tout the lack of monthly fees on their bank accounts. Many of which can be researched online and found easily.

If you can’t switch banks or find one without any monthly fees, then you may be able to waive the monthly fee by making a certain number of transactions or maintaining a certain balance in the account. Many banks will forgive the fee if you can meet one of these stipulations. These conditions vary from bank to bank, but you can learn more by reading the terms and conditions as well as the fee breakdown provided by any bank.

ATM Fees

Most banks have an out-of-network ATM fee that comes into play when using an ATM that isn’t owned by the bank. These can get expensive, but avoiding these fees is simple. Avoid out-of-network ATMs; most banks offer free ATM services on their branded ATMs. There are a few other ways to avoid them. Some banks offer refunds on ATM fees up to a certain limit per month, and many banks even offer unlimited reimbursement for these fees. Other banks offer an extended network of no-fee ATM machines that may not have the bank’s branding.

Overdraft Fees

An overdraft occurs when drawing money from an account without sufficient funds available. This typically results in an overdraft fee, and many account holders are on the hook for the fee as well as the negative balance in their account.

In general, the best way to avoid overdraft fees is to keep a careful eye on the money in your bank account. If the overdrawing transaction does not occur, then there is no reason to exact an overdraft fee. Additionally, there are banks that do not have any overdraft fees because they just refuse any transaction that would lead to an overdraft.

Some banks offer overdraft protection, a system that involves linking another account to the current bank account as backup. If an overdraft occurs, then funds are withdrawn from the link account to cover the transaction. In essence, the consumer is funding the transaction with their own funds. While this can help avoid fees, some banks still charge a fee for the transaction and backup. While the fee could still be assessed, it is typically lower than a standard overdraft fee.

Minimum Balance Fees

Many accounts will charge a fee if the account balance goes beneath a certain minimum balance. There are plenty of banks that offer accounts without these fees or any minimum balance requirement. Consumers who want to avoid this fee altogether may want to consider banking with companies that do not charge this fee. In some cases, setting up direct deposit can waive this fee, but this varies from bank to bank.

Inactivity Fees

Allowing money to settle without being used can sometimes incur an inactivity fee. Inactivity fees aren’t charged by many banks, so they are not hard to avoid. Each bank should address the inactivity fee in their bank account terms and conditions. If you bank with a company that implements this fee, setting up a recurring transaction, such as a monthly bill payment, to the account should be enough to avoid inactivity.

Bounced Check Fee

If you try to deposit a check that bounces, you’ll most likely be dealing with a bounced check fee. These fees are assessed to cover the processing expenses of the bank who ultimately does not receive any of the funds. These fees are hard to avoid when they are exacted, but proper check management and communication with the check writer should be enough to keep these fees to a minimum. However, it is still possible to find banks that do not charge this fee at all!

Foreign Transaction Fee

Many banks charge a foreign transaction fee. A foreign transaction fee is typically taken as a percentage of the purchase amount which is usually anywhere from 2 to 6 percent. The easiest way to avoid the foreign transaction fee is to stay in the country! That may not sound fun, so get this. In some cases, it’s possible to pre-clear foreign transactions by talking to the bank before going abroad. If it’s possible to pre-clear foreign transactions, the bank may offer a reduced fee or they could waive it completely. It doesn’t hurt to ask!

That wraps up the discussion of the most common personal banking fees and explanations about how to avoid them. Moving banks can solve a lot of fee-based problems, but even the most generous of banks have to make money somehow. In general, credit unions and online banks have fewer fees than the national or international banking giants, so they might be a good place to start looking to finish off most of the fees once and for all.


By Patty Moore, a blogger who writes about careers, family, and personal finances. Follow Patty on Twitter @WorkMomLife!

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