Manage Your Debt - Let's Explore Your Options


Bank fees! The hidden costs of having a bank account

Costly bank fees

This year banks are expected to earn $17.5 billion* from overdraft fees. The best way to avoid banking fees is to know your banks policies and, of course, manage your money carefully.

Overdraft protection

Overdraft protection or courtesy overdraft programs at banks are a very common practice. It works like this: a consumer does not have enough money in their account to cover purchases, so the bank pays for the purchase and charges the consumer a fee, anywhere from $17 to $39. Unfortunately, for many people the practice has reduced their bank accounts to a never ending circle of debt repayment. 

Here are some great questions to ask your bank about policies impacting overdraft protection or overdrawn accounts:

  1. Posting debits – Ask the bank how they post debits (purchases) to your account. Some banks will post the largest purchases first causing several small purchases to overdraw your account. You will be charged a fee for each item that overdrafts.
  2. Posting Credits – Does the bank post credits before they post debits? What time do credits (deposits) have to be received by the bank in order to post to your account the same day?
  3. Hold times – Banks will often hold checks before allowing you to use the money. They want to know the money is really there before you use it. Most banks have a hold time on paper checks, but not direct deposit.
  4. Daily fee – Does the bank charge fees for everyday that your account is overdrawn?
  5. Transfers from savings – Can you link your savings account to your checking account to cover overdrafts? If you can, is there a fee associated with the transaction?
  6. Does the bank ever allow an overdraft fee to be waived? If you have never overdrawn the account before, it is a good idea to ask if they will waive it this one time.

No Protection

If you do not have overdraft protection and you cannot pay a check you wrote, the bank will charge you an NSF (non-sufficient funds) fee and so will the people or business to which you wrote the check. In this situation having overdraft protection may help you avoid even higher fees and, in some extreme cases, jail.

Other Fees

In addition to overdraft fees bank accounts may have many other fees associated with them. These include:

  1. General fees – Does the bank charge a monthly fee for having the account?
  2. Is the monthly fee based on the balance you have in your account?
  3. NSF fee – How much is the NSF fee?
  4. ATM fees – Do they charge you for using another banks ATM?
  5. Online fees – Is there a charge to access your account information online?
  6. Bill pay fees – Do they charge for paying bills or transferring money online?
  7. Tele-banking fees – Are there fees for calling and requesting banking information?
  8. Teller fees – Are there fees for discussing your account with a teller?

Finally, the best way to avoid paying unnecessary fees to your bank or business where you shop is to manage your finances.

  • Keep track of your expenses. Use a check register, notebook or electronic spreadsheet to record checks you’ve written, automatic payments, debits, or other fees (ATM, bank, etc.) being subtracted from your account.
  • Periodically check your account throughout the month to see if checks and automatic payments have been deducted.
  • Review your monthly bank statement and remember to subtract any outstanding debits or checks that are not shown on the statement. Add in any deposits that are not shown.

Shop around when selecting a bank. People tend to feel that the local, home town banks typically charge less fees; that is not always the case. Check out local banks, national banks, and credit unions when trying to find the best deal.

Take the time to ask questions and understand how much the bank will charge you to access your money. In the end the money you save may be the difference between an overdraft charge and a positive account balance.

* Center for Responsible Lending. 2009. Quick Facts on Overdraft Loans. (last visited July 28, 2009)

Published Aug 4, 2009.