Bank fees - What are bank fees?
Bank fees are charges to a customer with a bank account for various services provided by a bank or as penalties for specific activities of the customer
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Fees from a bank can be the result of a variety of different activities. Generally, they result from a particular service being performed by the bank on behalf of the customer, or from a penalty charge.
Why banks charge fees
The list of reasons that a bank will charge a fee to a customer is long. Fees generally are one of the primary sources of revenue for the bank itself. While there are people who manage to avoid fees from their bank, there are still enough who pay bank fees to contribute significantly to the bank’s bottom line.
Fees are encountered for many different reasons, but there are some that are very common and are more likely to be charged to customers.
Bank account maintenance fees
One of the most common types of fees is charged simply for having an account open with the bank. These fees are usually charged monthly and may range from a seemingly insignificant amount up into the double-digits.
If your bank account is open with the intention of earning interest, monthly maintenance fees will effectively cancel out any potential earnings the account would have made.
It might be worth speaking to your bank about the options for waiving the monthly maintenance fee. For example, often banks will waive the fee if the balance of your account is above a certain amount, or if you set up a direct deposit to that account.
If this is not successful, there are banks that do not charge maintenance fees, so it might be worth looking into alternatives if you find that you’re paying more than you’d like.
ATM withdrawal bank fees
A familiar headache for travellers or for those who find themselves in an area without the ATM of the bank at which they hold an account. Banks will charge a small fee for using an ATM outside of their network to withdraw cash.
Unfortunately, there isn’t an easy way around this type of fee besides using ATMs owned or affiliated with the bank at which the account is located.
Bank fees for overdraft or insufficient funds
Banks will typically charge a fee if a charge or withdrawal is made that puts the account into a negative balance. Many banks offer a type of overdraft protection. What this means is that when the account goes to a negative balance, instead of declining the transaction, the bank will cover the additional amount but charge a fee for effectively ‘borrowing’ that amount.
Overdraft fees are generally very high, or come with high interest rates. A large UK bank recently made the news, for example, by changing their overdraft system to charge 1p per day for every £7 borrowed between a certain amount.
Failed transactions will also usually cause the customer to be hit with a bank fee. While it might be difficult to completely avoid overdraft, the main strategy for preventing this is to stay on top of your balance. Today, mobile banking apps and more make this easier than ever with the possibility to set up alerts if your balance falls below a certain amount, for example.
Wire transfer bank fees
Most banks will charge a fee to wire transfer money both into and out of an account. The rates that banks charge differ, but it is usually a flat rate. In some situations, banks offer waivers for wire transfer fees, for example if it’s to another account within the same bank.
Today, there are many options for alternatives to wire transfers that offer significantly better rates for transferring money. Doing a little research into reliable transfer services could end up saving a lot of money, especially for regular transfers.
Preventing bank fees
These three are just the most common types of bank fees. However, there are many additional fees that can come up for customers. While there are options for avoiding many types of fees, some are more difficult to prevent altogether.
The best way to avoid fees, aside from bank selection, is to stay on top of your accounts. This goes for both personal and business bank accounts. Online accounting & invoicing software like Debitoor makes it easy to record income and expenses from anywhere, giving you the tools to manage the financial side of your business easily.