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Personal Finance Courses: Managing Your Money at a Bank or Credit Union

Introduction to Managing Your Money at a Bank or Credit Union Establishing a Relationship with a Bank or Credit Union How to Choose Bank Accounts to Meet Your Needs Understanding Bank and Credit Union Fees Opening Accounts at a Bank or Credit Union Check Cashing Stores Managing Your Bank Accounts Responsibly Overdrafts on Your Checking Account Checkbook Simulation Activity Summary of Managing Your Money at a Bank or Credit Union
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Understanding Bank and Credit Union Fees

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Understanding Bank and Credit Union Fees

There are many potential fees to be aware of on your checking and savings accounts. Some fees are easily avoided with proper management of your account. Let’s take a look at the most common fees you could incur.

  • Maintenance fees. These are periodic fees (usually monthly) that compensate the institution for the services it provides. Not all accounts charge them; some of those that do charge them may waive the fees if, for example, you use direct deposit for your paychecks. Fees are generally understandable, but compare them to other banks or credit unions to make sure they are competitive.
  • Low-balance penalty fees. This is a fee levied on you if your balance falls below a certain amount. It is therefore an incentive to keep your balance high, which is a benefit to the institution. How it is calculated may be important to you: is it based on your average daily balance, the balance on a certain day of the month, or the lowest balance during the month? Depending on the method used, you may be able to dip below the required amount at various times and still avoid the fee.
  • ATM fees. There are several possible charges related to automated teller machines. You may be charged a fee to use your institution’s ATM; there’s a strong chance you’ll be charged to use the ATMs belonging to other institutions. On top of that, if you lose your ATM card, you may be charged for a replacement card. You can get around ATM fees by taking out larger withdrawals when you visit your branch, and also by taking out extra from a debit card when you make purchases with it.
  • Overdraft fees. Overdraft fees are expensive and average $35 per transaction. If your account is overdrawn and you write three checks or use your debit card for three different purchases you will be charged three overdraft fees. It is very important to monitor the balance in your account as well as consider having overdraft protection in place.
  • Overdraft protection fees. Many financial institutions will offer overdraft protection programs. A common service is to have money automatically transferred from your savings account to your checking account whenever it falls below a balance of zero. Most institutions charge $5–10 dollars per transfer. This is much cheaper than a single overdraft fee of $35.
  • Bounced check fees. If you write a check and don’t have enough funds in your checking account to cover it, you will have an overdraft and will likely be charged an insufficient funds fee (bounced check fee, in other words). You can avoid these by being careful with your checking and/or by getting overdraft protection.
  • Returned check fees. If someone writes you a bad check that you deposit, you may be charged.
  • Check printing fees. If you want your bank or credit union to print checks for you, there will be a fee. This fee may be waived if you are new, if you have a high minimum balance on your account, or if you belong to certain preferred groups such as senior citizens. Alternatively, check printing fees are often much less at professional check printers.
  • Per-check charges. If your institution limits you to a certain number of checks per month, you will be charged fees if you write more than the limit.
  • Canceled check return fees. If you want canceled checks but they are not normally provided, you can often get them for a fee.
  • Closed account. If you close an account early that you agreed to keep open for a certain length of time, there may be a fee for closing it.

Ask yourself some questions about these fees

If you are not careful or strategic with your account, you could rack up a lot of expenses. Take a running total of your expenses for the past month and multiply them by 12 to see how much you are paying in expenses. If the total is in the hundreds of dollars, do a mental cost-benefit analysis and determine for yourself whether the fees are worth what you are getting. Has your bank or credit union met your expectations throughout the year? Is it offering what you really want and need? Do you see other uses for that fee money, or is it justified for you?

If you haven’t yet opened an account for yourself, be aware of all these fees and be aware that they can take a large bite out of your account balance if you are not careful.

Consider these questions as you look at the fees you are paying. If you don’t like them, you might consider switching to a different institution or changing your behaviors to incur fewer fees.