Like it or not, banks are in the business of making money. And two ways they do that is by collecting interest on money they loan and charging fees on the services they provide to their customers -- you. But when the federal government tightens the restrictions on banks, as they did most recently in 2010, most banks' operating costs increase, and their options for covering those costs become more limited. So they typically pass on those higher costs onto their customers in the form of new fees.
So can you completely avoid paying these fees? With so many of them to evade, it's highly unlikely. But to answer the question fully, we have to first look at what banking services are offered for free. We'll narrow it down to just checking accounts, since those are the most popular for handling money and used for day-to-day purchases. Then, let's look at ways we can avoid any additional fees on those checking accounts.
First, is "free checking" even still available? The new federal regulations set in 2010 prevent banks from advertising an account as free if it has any fees associated with it. The regulation was established because so many banks were simply calling accounts free that weren't free at all. Banks were actually waiving the account fees for customers that complied with a set of rules and guidelines. Today, the bank can still waive the fees if customers follow those guidelines, but the accounts can't be promoted as free.
So if you comply by a few rules, you can still benefit from free checking. But what are those rules? Well, that depends on the type of account and bank you're using. For example, in January 2011, Chase offered Chase Checking, which waived its $6 monthly fee if, during the month, you made five or more debit purchases or had at least one direct deposit of $500 or more [source: JP Morgan Chase]. At the same time, Bank of America introduced its eBanking account, which waived its $8.95 monthly fee if you made deposits and withdrawals only electronically or at an ATM, and you received your monthly statements via the Web instead of through the mail [source: Bank of America].
If you need more flexibility in your checking account, you can try a low-cost account rather than attempting a free one. If you join a credit union, you can pay a modest membership fee in exchange for lower costs and some free services. For example, in January 2011, Coastal Federal Credit Union in North Carolina required a one-time $25 deposit into a savings account and a pledge to maintain that deposit from one year to the next. But once customers make the commitment, they can open a fee-waived checking account with more flexibility than the Chase Checking [source: Coastal]. Plus, if you're not able to meet Chase's strict fee-waiving requirements, the Coastal checking could save you almost $50 over Chase in the first year alone, and more than $7 each additional year as long as you still maintain at least $25 in your primary savings account.
Keep reading to find out if you can avoid additional banking fees.
No More Fees
After you've found ways to avoid monthly and annual fees for your checking account, eliminating all other possible bank fees means you'll have to pay close attention to your accounts and how the rules and fees change over time. Use the following tips to help avoid those additional charges:
- Know the rules and fees for your account. It might seem like a boring read, but take time to highlight or underline any rules or fees you might find challenging to avoid.
- When the bank notifies you of changes to your account, make sure you know how those changes affect you.
- Keep an eye on your account balance each day, and know how much you'll have left after the bank processes any outstanding checks or debits.
- Don't make any payments unless you know they will be covered. Nonsufficient funds (NSF) fees and overdraft fees are some of the more expensive charges you can receive.
- If you have designated a savings account as an overdraft account, stay ahead of the bank and make any necessary transfers when your checking account balance is low. If you transfer the money yourself, you can avoid the bank's overdraft protection fee.
- If you need to maintain a minimum balance to avoid a monthly fee, make sure you always have at least that amount in your account.
- Don't get stuck using other banks' ATMs to withdraw cash, since you'll pay ATM fees at both ends of the transaction.
- Don't lose your ATM card. You may be charged for each replacement card.
- Use the Internet instead of the phone for customer service. Some banks charge a fee for customer service by phone. Look for a Web form or e-mail address instead.
- If you have a good history with your bank, shop around and then negotiate comparable -- or better -- rates and features with your bank. They may be willing to strike a deal to keep your business.
At a glance, it looks like you can avoid bank fees if you're diligent. However, the next page describes one important exception.
There's one big exception to our question: transactions in foreign countries. If you travel outside of the United States, you might not be able to avoid bank fees, because you'll likely pay to have one currency converted to another if you make purchases with your credit card.
Using cash is always an option; just be sure you have enough currency when you enter the country so can avoid ATMs once you arrive. And unless your bank offers foreign currency exchange services free with your account, expect to a pay small fee to exchange your money.
You can also purchase other resources, like traveler's checks, that you can turn into cash after you get to your destination. Some clubs, such as AAA, even offer traveler's checks as a free service for their members [source: AAA]. Pre-paid debit cards, such as Visa TravelMoney, are another option that you can use internationally [source: Visa].
Compare all of the different currency options before your trip, and don't be surprised if cash actually turns out to be your best bet.
- AAA. "The Convenience of AAA Travelers Checks." (Jan. 18, 2011)http://www.aaa.com/AAA_Travel/TravelMoney/traveler_check.htm
- Bank of America. "Compare Checking Accounts, North Carolina." (Jan. 17, 2011)https://www.bankofamerica.com/deposits/index.action?body=check_compare&state=NC
- CBS. "Simple Steps to Avoid New Banking Fees." Dec. 11, 2010. (Jan. 16, 2011)http://www.cbsnews.com/stories/2011/01/11/earlyshow/living/money/main7234417.shtml
- Coastal Federal Credit Union. "Dividend Checking." (Jan. 17, 2011)http://www.coastal24.com/personal/checking/dividend-checking.html
- Federal Reserve, The. "What You Need to Know: New Overdraft Rules for Debit and ATM cards." June 22, 2010. (Jan. 16, 2011)http://www.federalreserve.gov/consumerinfo/wyntk_overdraft.htm
- JPMorgan Chase & Co. "Chase Checking Accounts." (Jan. 17, 2011)https://www.chase.com/online/Checking/chase-checking-account.htm
- Palmer, Kimberly. "New Banking Fees? Here's How to Avoid Them." U.S. News & World Report LP. June 29, 2010. (Jan. 16, 2011)http://money.usnews.com/money/blogs/alpha-consumer/2010/6/29/new-banking-fees-heres-how-to-avoid-them-
- Visa. "Visa TravelMoney." (Jan. 18, 2011)http://usa.visa.com/personal/cards/prepaid/visa_travel_money.html