Once upon a time, we actually made money by handing over cash to the bank for safekeeping. Today? Not so much. With the average interest rate on savings accounts at a microscopic 0.06 percent, it's way more likely that we’ll lose money.
For one, the inflation rate is now at about 2.2 percent, meaning prices for items like gas and basic groceries are going up faster than the interest we’re earning on any money at the bank. So the value of our money is dropping.
But our balance is often literally dropping, too, thanks to ever-increasing bank fees. According to a new Bankrate survey, the average cost for using an out-of-network ATM is now $4.69, up 2.6 percent from last year, while average overdraft fees have hit a record $33.38.
We can’t do much about inflation, but understanding how banks use fees can help us keep more of our hard-earned money. Here are three top offenders.
The real problem here is that one negative balance incident can lead to a series of overdrafts, each triggering a set of hefty charges. In fact, consumers who opt for bank overdraft coverage pay an average of 18 fees per year.
With overdraft coverage, charges go through, but you pay for the privilege of borrowing to cover them. You’re likely better off declining overdraft protection. This means your bank will decline debit card purchases or ATM withdrawals if you don’t have enough money and stops the cascade effect.
Instead, try linking your savings account or credit card to your checking account. Then you’ll be borrowing from yourself, rather than the bank, if you overdraft. There’s still a fee, but it’s usually much cheaper. Or use online and mobile banking tools to track your balance, and set up alerts if you fall below a certain level, to help avoid overdrafting altogether.
We all know how to avoid out-of-network ATM fees: Run around looking for your own bank’s machine. Too bad that’s not always practical—and even just one out-of-network withdrawal each month adds up to more than $55 a year.
So plan ahead. Grab a few $20s when you walk by your bank’s ATM, even if you don’t need them. Or better yet, sign up for an account at a bank that refunds “foreign” transaction fees.
Most “free” checking accounts are only free under certain conditions—like if you maintain a minimum balance or make monthly direct deposits, for example. Failing to meet these requirements can cost a lot: Both Bank of America and Chase have basic checking accounts with a $12 monthly fee.
What’s more, maintenance fees have gone up 8.5 percent in the past couple years—making them perhaps the worst bank fee you’ve probably never heard of. If you keep getting hit because you can’t meet the minimum requirements, your best bet is to consider another bank. Online institutions, like Ally and Simple, offer no-fee checking accounts.
In addition to the big three, there are a host of other annoying fees. Many banks charge a few bucks a month for paper monthly statements now, and even more if you want paper copies of canceled checks. Lose your ATM card? You’ll often have to pay for the replacement—especially if you want it rushed.
And of course, banks are trying to dream up new fees all the time. So keep your eye on your (online) statement, always looking for unexpected fees. If the bank isn’t going to pay you much interest, you should at least keep all your money.