“My bank keeps charging me fees that I really can’t afford. What can I do?”
Quick answer
Switch banks. There is absolutely no need to be paying lots of fees for your bank accounts.
Detailed answer
(Full disclosure: This is focused on the U.S. banking system.)
Raise your hand if you’ve ever been personally victimized by Regina George your bank.
Here’s a run down of common fees:
Account maintenance fee: Usually around $12 per month for the privilege of having a checking/savings account. This can be waived if you have a certain amount direct deposited or have a minimum daily balance of $1,500+ or have a certain status with the bank.
Overdraft fee: You overspend the amount in your account and it goes negative. Your bank charges you a fee (usually ~$30) for being in the red. It can even charge you multiple times in a day if you keep swiping, or auto payments hit, before you realize you’ve gone overdraft.
Overdraft protection: Automatically have money moved out of savings into checking if your checking account falls into the danger zone for going overdraft. It costs the bank next to nothing to do this, but it will charge you $12 or so for “protection.”
ATM fees: Fail to use your bank’s ATM? Be ready to pay! Let’s say you use Town Bank, but you’re visiting an area where your bank doesn’t have a presence. So, you need to use Country Bank to get cash out at the ATM. Country bank is going to charge you a fee to use its ATM because you aren’t a member (probably around $3.50). On top of that, Town Bank is going to penalize you for daring to go to a competitor and charge you $2.50. That means you spent $6 to get your own money out in cash.
If you only take one point away from today’s newsletter, let it be this:
YOU DO NOT NEED TO BE PAYING A FEE FOR A CHECKING OR
SAVINGS ACCOUNT!
You also don’t need to pay high overdraft fees that can hit multiple times a day.
Or pay a fee for overdraft protection.
Or pay an ATM fee and get charged by your bank for using a competitor’s ATM.
It’s really that simple.
Even if you aren’t being hit with fees every month, you should be annoyed with how much banks gouge their customers.
Want to know how much some banks made on overdraft fees alone from January to September of 2021?
Wells Fargo made $1 Billion (yes, billion with a B)
JP Morgan Chase made $924 million
Bank of America made $823 million
TD Bank made $347 million
This is according to data collected by the Consumer Financial Protection Bureau.
To be clear, it’s not the affluent customers paying those fees. It’s typically people for whom $12 in checking or a $30 overdraft fee (or up to $105 in a day if you get three) can be a huge burden. It can be the difference between certain bills getting paid or groceries being purchased.
Banks are for-profit institutions and that’s completely fine, but this feels like needless gouging to me and it pisses me off!
Okay…so where do I bank?!
Internet-only banks (sometimes called “Online Banks”) are the easiest solution. For example, options like Ally or Capital One 360. You can also check out what your local credit union offers.
Internet-only banks offer actually fee-free checking and savings accounts. Many will reimburse you for ATM fees charged by other banks. Overdraft protection is actually free and overdraft fees are often much lower than traditional brick-and-mortar banks.
The catch is that you can’t easily deposit cash, so if you work in a cash-heavy industry, then you may still need a brick-and-mortar bank. Capital One 360 has done the best at accepting cash and you can actually go to a CVS to deposit cash into your account.
P.S. doesn’t even get at the topic of paltry interest rates (APY) on savings accounts at brick-and-mortar banks!
But we’ll save that rant for another day.