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Bank fees can cost you more than $150 a year — here's how to avoid them

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Between ATM fees, overdraft charges, monthly maintenance, and other charges, the typical checking account holder pays $7.69 every month, according to a recent survey from Bankrate.

Millennials pay an average of $13 per month in fees, more than four times what baby boomers shell out. Black and Hispanic account holders pay $12 and $16 in monthly fees, respectively, Bankrate found, while white account holders pay an average of $5.

While many of those disparities can be attributed to wealth — people who are white and at least middle-aged tend to be wealthier than those who aren't, and many banks waive fees only after minimum balance or deposit requirements are met — it's possible to significantly reduce or zero out your monthly fees, no matter what your situation.

Here are some tips on how to do that.

Understand where the fees come from

Many banks charge you a recurring maintenance fee for a checking account, often around $5 to $15 a month, although high-end accounts can top $25. They may waive that, though, if you maintain a minimum balance or deposit a certain amount of money each month. If you set up direct deposit at work so that your paycheck goes straight to your account, that could be enough to satisfy the requirement.

ATM fees are another of the most common bank expenses. When you use a machine that doesn't belong to your bank, or is outside of your bank's network, both your bank and the bank that owns the ATM can charge you a fee.

Overdraft fees are one of the most expensive charges an account holder can encounter. If you have $10 in your checking account and make a $50 purchase, the bank will cover the extra $40 so your purchase will go through. You'll have to pay a fee every time this happens, and it's possible to get burned multiple times in one day.

Opt out from your bank's overdraft coverage

Since an overdraft is essentially a short-term loan, you'll have to pay that money back, plus the fee, usually by the end of the day, and often with interest if you end up needing more time than that.

The average overdraft fee comes to just over $33, according to Bankrate.

Your bank may also offer overdraft protection. If you've signed up for this optional service, the bank will pull necessary funds from a linked savings or checking account. You'll typically pay a transfer fee, although that is often much lower than an overdraft fee.

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Since your bank may cover overdrafts by default, unless you set up overdraft protection or ask that overdraft-triggering transactions be declined, account holders may "find themselves getting hit time and time again with overdraft fees without realizing they opted in," says Amanda Dixon, an analyst at Bankrate.

Even if you set up overdraft protection, keep tabs on your account balance, cautions Marcus Dodson, an account coordinator at U.S. Bank and campaigner with the advocacy group Committee for Better Banks.

Depending on your bank, overdraft protection may only apply to debit card transactions. If you write a check for more money than your account balance, the check could still bounce, triggering a nonsufficient-funds fee. That can be as expensive as an overdraft.

Use ATMs strategically

For every transaction you make at an ATM that's outside of your bank's network, the average total fee is currently $4.72 per transaction, according to Bankrate. That includes an average charge of just over $3 from the bank that owns the ATM, plus $1.63 on average from your bank to use an ATM that isn't theirs.

Experts say this fee is "completely avoidable," especially if you're strategic about your ATM use. Many digital banks also offer rebates on some or all of the ATM fees you incur.

[Account holders may] find themselves getting hit time and time again with overdraft fees without realizing they opted in.
Amanda Dixon
Analyst at Bankrate

Shop around for a 'fee-free' account

The easiest way to dodge fees: Do business with a financial institution that doesn't charge many, if any, fees.

More than 40% of checking accounts qualify as "fee-free," according to Bankrate, meaning that they have no monthly maintenance fees or minimum balance requirements at all. That doesn't mean that you would be immune to ATM or overdraft fees, though, so you'll still need to watch out for how and when you withdraw cash and the balance you keep in your account.

Despite the availability of banks with low or no fees, the average American adult has used the same checking account for about 14 years. Switching banks may feel daunting, but it can be worth it if doing so helps you avoid extra fees.

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