3 Pesky Bank Fees — And Tricks to Avoid Them

You don’t have to pay to house your money with a bank if you follow these strategies

Donna Fuscaldo,

AARP

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En español

Published September 16, 2022

/ Updated August 22, 2024

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Bank fees have fallen since the pandemic, but that hasn’t stopped consumers from spending huge sums on these added expenses. Dubbed “junk fees” by the Consumer Financial Protection Bureau (CFPB), bank fees drain billions of dollars from American households each year.

They run the gamut from charges for not having enough cash in your bank account to charges for withdrawing money from an out-of-network ATM. In 2023, revenue from overdraft and non-sufficient funds was estimated at $5.83 billion, a 24 percent year-over-year decline from 2022, according to the CFPB.

The White House wants to see those fees fall further, proposing a new rule that could slash overdraft fees to as low as $3, a far cry from the $27.08 average as of 2024, according to Bankrate. As it stands, about 94 percent of accounts are subject to an overdraft fee, which can be as high as $32.70.

The rule would apply to banks and credit unions with over $10 billion in assets, or about 175 of the country’s largest financial firms. Banks, which are expected to challenge the proposed rule, would be required to calculate and disclose an annual percentage rate on every overdraft fee. The CFPB estimates consumers will save $3.5 billion a year or more, or about $150 per household that pays overdraft fees. If the proposed rule doesn’t end up in the courts for years it will go into effect in October 2025.

It’s not just overdraft fees that are hurting American’s bank accounts. ATM fees are also up, with the average ATM surcharge at $3.19, according to Bankrate. Meanwhile, the average combined ATM fee for an out-of-network withdrawal (the fee paid to your own bank as well as a surcharge levied by the ATM owner) is $4.77, up for the fourth year in a row.

Consumers don’t have to wait for rules and regulations to pass. According to Greg McBride, chief financial analyst at Bankrate, bank fees, while “still as ever present as they have been, ... are also more avoidable than ever before.”

If you’re looking to reduce overdraft fees, monthly maintenance charges or fees for withdrawing cash, there are ways to do so — and they don’t require finding a new financial institution. Here’s how you can avoid the most common bank fees.

ATM Fees

Withdrawing money at ATMs is all about convenience, which is why so many consumers go to the nearest location, even if it’s not in their bank’s network. Sure, withdrawals are free at your bank’s ATMs, but if you need cash in a pinch and there is none nearby, the fees for using out-of-network ATMs can add up. To avoid these fees, do the following:

Stay in network. “There are tens of thousands of ATMs around the country in some of these networks,” says McBride. Locating them is easier than ever these days. A quick check of your bank’s website or mobile app should yield a list of nearby ATMs. Also, some online banks that don’t have their own ATMs will reimburse you for any ATM fees you incur.

Get cash back at the point of sale. When you use your debit card at a store checkout and get cash back, you’ll avoid a visit to an ATM and thus a potential fee. “If there are no nearby ATMs and you’re in need of cash fast, consider taking out a larger amount so you have it on hand and don’t get hit with another fee should you need more cash soon after,” says Poulomi Damany, general manager of money and tax at Credit Karma.

Overdraft fees

Overdraft fees can be a drain on your bank account. For many people, they create a never-ending cycle of bounced checks and extra fees, which is one of the many reasons these fees get so much scrutiny from government watchdogs and consumer advocates. After all, overdraft fees tend to penalize customers with limited financial resources, creating obstacles for them to overcome.

Fortunately, there are ways to avoid these fees as well.

Take cash out instead of using a debit card. Overdraft fees often occur when you use your debit card, so don’t use it. Instead, consider taking cash out when you get paid and dividing it among your spending categories. “If you start the week with $100 in your wallet and you’re down to $30 by Wednesday, you know you have to plan and pace yourself,” says Damany.

Get notified. Most banks offer customers the option of signing up for notifications when their balance reaches a low level. The alerts come via text or email. If you link your savings to your checking account, you can quickly move money when you receive a low-balance alert. That will prevent an overdraft fee that could push you into the red and prompt a charge. You can also opt out of overdraft protection. If a check hits your account and there aren’t enough funds, it will simply be rejected.

“We are starting to see banks decreasing their overdraft fees or decreasing the instances where they apply, and in some cases eliminating the fees altogether,” says McBride.

The CFPB found consumers who pay more than 10 overdraft fees per year are responsible for close to three-quarters of all overdraft fees. They shell out an average of $380 in these fees annually, making it difficult to catch up.

Monthly maintenance fees

Monthly maintenance fees, also referred to as monthly service fees, are the amount you pay to store your money with the bank. They’re typically withdrawn from your account automatically on a monthly basis. Although some banks charge no such fees, many still do.

There are several ways to avoid them, including maintaining a balance in your checking account, signing up for direct deposit or having a predetermined number of transactions per month. Of the ways to waive this fee, Bankrate found that direct deposit is the most commonly offered.

“We see a very widespread availability of free checking accounts, with 46 percent of non-interest checking accounts free,” says McBride, noting that some checking accounts geared specifically toward older adults have low or no fees. “Almost all of them [banks with a maintenance fee] can waive it by having direct deposit of your paycheck or Social Security check.”

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Donna Fuscaldo is a contributing writer and editor focusing on personal finance and health. She has spent over two decades writing and covering news for several national publications including The Wall Street Journal, Forbes, Investopedia and HerMoney.