Bank fees are bleeding you dry. Here’s the fix.

Bank fees are going to be one of the most boring topics I write about on this blog.

But for one of you…. it will also be one of the most important topics. Maybe even the thing that kick starts your money progress…. especially if you’re someone who finds themselves constantly paying bank fees without really understanding why.

Why Bank Fee Literacy Matters

Fees aren’t just that annoying thing you pay when you’re late on a credit card payment, or forget to use the in-network ATM. Fees are the revenue backbone for a bank. It’s literally one of the only ways they can make money from everyday people.

And boy, do they make money. Think over $14 billion dollars in overdraft fees alone back in 2022, according to a Bankrate report at the time. Which is chump change compared to the $120 billion banks collected in credit card interest that same year, according to the Federal Reserve.

Put another way – while we scrambled to recover in a post-pandemic world, the banks did this with our fee payments:

And the dangerous part? Many people pay these fees simply because they don’t understand how it all actually works. Enter today’s post.

5 Common Bank Fee Types & How to Avoid Each One

Let’s break down each bank fee below and what you can do. You can also check out this video here, if that’s more your speed.

1) Maintenance Fees

What: Typically a monthly charge, just for the bank managing and hosting your account.

How Easy To Avoid: ✅ ✅ Easy

Remedy: Find a bank that doesn’t charge fees, or ask if your current bank is willing waive them. It’s actually very common for banks to not charge maintenance fees (because holding your cash is technically a privilege for them. Don’t be the one who pays them for it!)

In that same vein, if you have fees that are driven by certain requirements (i.e. maintaining a minimum balance), make sure you’re on top of those to avoid paying.

2) Overdraft Fees

What: Charged when you try to draw more money from your cash account than what you actually have (for example, if you try to pay a $75 bill from your checking account, but you only have $50). The bank covers the difference that you’re short, which is ultimately why this fee gets charged.

How Easy To Avoid: ✅ Doable

Remedy: You have a few options, including:

1) Turning off overdraft protection – which can be done in your bank settings) if you want to cancel the ability for the bank to cover you in the event of a shortfall. (Just remember that this means your transaction would get declined in that hypothetical bill scenario just now.)

2) Monitoring your cash balance to ensure your accounts don’t dip too low.

Pro-tip: Cash Balance alerts can typically be set up from your online banking dashboard, and will email/alert you when your checking account falls below a certain number.

3) ATM Charges

What: The cost of withdrawing cash from an ATM machine, particularly when that ATM is out-of-network from your bank. Note that people typically pay a double-dip fee when they use out of network ATMs: 1) the fee that your bank charges you for going out of network and 2) the fee that the ATM vendor charges you to use their machine.

How Easy To Avoid:🟠 Depends / May Require Planning

Remedy: Use an in-network ATM wherever possible, because ATM fees can easily add up fast. This may require some advanced planning depending on where you live and how accessible those ATMs are.

4) Credit Card Interest

What: Essentially, the fee you pay to borrow money from the bank. The amount is based on your interest rate and remaining statement balance. (So for example, you spend $1000 on your credit card and the bank charges a 20% APR. If you don’t pay back that $1000 by the end of your statement period, you’ll owe the bank ~$1017 at the beginning of your next statement period.

But remember, this amount balloons very quickly depending on how long you maintain an outstanding balance. AKA, the reason why people fall into crippling debt.

How Easy To Avoid: ❗Very Much Depends

Remedy: If you can afford to, then the fix is super easy: pay your credit card balances off in full before the end of every statement period. Any dollar you carry into the next statement period will generate interest.

If you can’t afford to pay off in full – do your best to always pay more than the minimum amount. Paying the minimum may help you avoid late fees, but it will keep you in debt for longer (aka you’ll pay more interest over time this way). By making higher payments, you’ll be able to put more money towards reducing your principal balance (the amount you actually borrowed from the bank), which will make your remaining statement balances lower/accrue less interest.

5) Late Fees

What: The fee you pay when you’re late on a payment, most often for credit cards or personal loans.

How Easy To Avoid: ✅ Doable

Remedy: Never miss a payment. This means paying by the statement date AND paying at least the minimum amount. (Again, you want to aim to pay more than the minimum from a debt reduction standpoint. But worse case, it’s better to make a minimum payment and avoid a late fee than none at all.)

Pro-tip: Don’t ever let “forgetting” to make a payment be the reason you’re charged a late fee! Use your calendar or alarms to set reminders for when payments are due. You can also typically configure an alert through your online bank settings, so that you get an email days before your payment is due.

And worst case: you can always try calling your bank to ask them to waive that late fee. They’re usually happy to do this if you have a good track record with payments, so it truly can’t hurt!

In short – let’s stop making the banks rich.

And if you want a video breakdown of the tips above, be sure to check out this brief explainer video from my channel!