With stagnant economies all around the world, many central banks have taken to implementing quantitative easing programs over the last decade to revive activity in their country and support growth.
Very low interest rates have weighed heavily on bank profitability, which has pushed them to increase many of their fees.
While fees mean profits for big banks and other large financial institutions, they can put a dent in your financial health. But don't worry, there are many ways to avoid accumulating bank fees, start by being aware of the fees you are paying and the ones that you can sidestep.
What are the heftiest banking fees and how can you avoid them?
Overdraft Fees
If you don't have enough money on your account to make a purchase or an ATM transaction for example, your bank might process the payment if you have subscribed to an overdraft protection. In addition to ask you to repay the overdraft amount, the bank will charge you a fee.
Always remember to monitor your accounts to be sure you have sufficient funds available. Sometimes banks even allow you to set up alerts when your balance dips below a certain level, or if a given transaction might overdraw your account.
When you deposit money in your accounts, remember that this money might not be immediately available.
Many people do not realize that paying an overdraft fee, also called NSF fees for "Non-Sufficient Funds", could be avoided by simply not opting in to an overdraft coverage.
Savings & Investing Fees
When it comes to savings and investment vehicles, banks can charge big fees to allow you to use general and simple savings and investment accounts.
That's why you might want to consider tax-advantaged accounts, such as the American 401(k) or Individual Retirement Account or the Canadian Tax Free Savings Account (TFSA) to lower your tax burden.
Usually used to prepare for retirement, this account allows you to use your savings to invest in certain financial instruments, like exchange traded funds, stocks, bonds or guaranteed investment certificates among other assets, while taking advantage of tax free gains.
To have a quick idea of how much savings you can make with this type of account, have a look at this TFSA calculator (see image below). The calculator even goes as far as telling you just how much you could save by moving from a big bank to a low fee automated investing firm.
Maintenance Fees
The maintenance fee is what you pay so that the bank lets you use your money and keep your account open. In the eyes of many, this fee is unfair as you're paying to be able to use your own money, while the bank is already making money with it.
To avoid paying this fee, you might want to shop for banks that do not apply maintenance fees, such as many online banks.
If you want to stay with your bank, you might want to consider programs like fee waivers that do not apply maintenance fees if certain criteria are met, such as like paperless statements, minimum account balance, direct deposits, using more services offered by the bank, etc.
Most importantly, you need to read the fine print on your account to be sure you meet the requirements for avoiding fees, as banks can change their rules and requirements whenever they want.
A final word
While we've covered the 3 most important fees you often face when dealing with banks, the list goes on - there are plenty of other fees you need to be aware of, such as the ones linked to ATMs, wire transfer, account inactivity/closing, cash advance, foreign transactions, etc.
Just because there are bank fees doesn't mean you have to resign yourself to paying all of them! Planning and comparison are always helpful to making the best decisions and avoid paying too much fees. Moreover, sometimes you can avoid paying fees (or lower them) by just asking your bank manager not to apply them.
