Americans pay a lot of fees, late fees, bank fees, investing fees. We want to show you how to stop paying fees.
It’s That Much?!
When you add up all the various fees Americans pay, the number is in the billions. You read it right. That’s billions with a b. Every dollar you’re paying in fees is a dollar you don’t have for better things like paying off debt, saving for a home, or even just enjoying a nice dinner out.
But with a little digging, we found ways to avoid some fees entirely and reduce others significantly.
There are several fees that banks charge customers; these are the most common. You can avoid all of them.
In 2016, Americans spent $15 billion on overdraft fees. Your bank charges you an overdraft fee when there isn’t enough money in your account to cover a check you wrote or a transaction you made with your debit card.
Some banks allow the transaction to go through, and others don’t but either way, most charge a fee. The fee varies bank to bank but if you overdraft, expect to be charged about $35 for your transgression.
If your account remains overdrawn for a certain number of days, you may be charged another fee, called a sustained overdraft or extended overdrawn balance fee. This fee is often levied if you don’t correct the overdraft within 5-7 days.
Your bank may offer overdraft protection which is basically a loan from the bank to cover a transaction you don’t have the funds to cover. The service isn’t automatic; customers must opt-in.
This is not a free service. An overdraft loan charges interest and the rate is usually very high. And the bank will likely still charge you the overdraft fee as well. The protection just ensures the transaction will go through. You’re still responsible for the fee. Most banks offer overdraft protection in amounts from $500 to $2,500.
Some banks allow customers to link their bank accounts to a credit card as a means of covering an overdraft. This is considered a cash advance by the credit card company which means a higher rate of interest than is charged for purchases made on the card and no grace period.
The interest starts accruing the moment the transfer is made.
Minimum Balance Fees
A minimum balance fee is charged by some backs when your account balance falls below an amount set by the bank. The fee is applied in different ways. Some banks charge it if your balance falls below the minimum at any point in a month.
If your bank has a minimum daily balance requirement, the fee is charged if you fall below that number at the end of each business day.
Some banks consider your total combined balance, usually meaning your checking and savings account. One account can fall below the minimum, but as long as both combined remain above the minimum, no fee is assessed.
Some banks charge the fee based on your average monthly balance. Your balance at the end of each day during the statement cycle is combined and divided by the number of days in the cycle to get an average. If the average is above the minimum, you won’t be charged the fee.
Mailed Copy Statement Fees
Most of us probably get our bank statements online, and if you don’t, you might consider it. Some banks charge $1 to $5 if you want a paper statement mailed to you.
I try to avoid using cash as much as possible because I find it difficult to track. I can take out $100 on Friday and have $8 left Monday and wonder where it all went. Some people feel the opposite. Spending cash keeps them more accountable because spending cash feels more “real” than swiping a debit or credit card.
Whatever side of the fence you fall on, we all need cash sometimes, and if you haven’t planned ahead and taken cash from an ATM at a branch of your bank, you are likely going to be stuck paying an ATM fee of between $1 and $5.
Avoiding Bank Fees
There are so many banks, both brick and mortar and online, competing for your business that there is no reason you should pay any of these fees.
To avoid overdraft fees, opt out of overdraft protection. Sure it’s embarrassing when your debit card is declined but suffering a little embarrassment is better than paying $35 or more for that $3 latte.
Minimum balance fees can be avoided at most banks if you arrange for your paycheck to be direct deposited into your checking account. Some banks waive the fee if you pay at least one bill through your online account.
The simple answer to avoiding a mailed statement fee is to look at your statement online. If you need a hard copy, you can print it. I like to keep unnecessary paper to a minimum, so I don’t get paper copies of any of my bank or credit card statements or any of my regular bills.
Occasionally you may need a copy of a canceled check. Most banks make those available online too for up to seven years after the date the check posted, and you can print it out.
If you aren’t near a branch of your bank, you may still be able to avoid an ATM fee. Some banks put their ATMs in affiliate partner’s retail outlets. Citibank has ATMs in 7-Eleven convenience stores, and Wells Fargo puts their machines in QT gas stations.
Because these machines are bank-branded, bank customers can withdraw money without paying a fee.
Many drug and grocery stores will let you get cash back when you make a purchase over a usually small amount. There is usually a limit as to how much you are allowed to take out, and it may not be enough. Walgreens and CVS only allow you take $20 back at a time.
You can avoid jumping through nearly all these hoops required to avoid fees by choosing a good bank. Two of the best are both online banks. Some people are hesitant to join a bank with no brick and mortar locations but really, when is the last time you had to actually go into a bank branch for something?
Bank of Internet USA has a rewards checking account with no overdraft or minimum balance fees. Customers are reimbursed for unlimited ATM withdrawals within the United States.
Chime is another excellent online bank with few fees. They charge no overdraft, minimum balance or foreign transaction fees. There is a $2.50 fee for using an out of network ATM, but if you use one of the 24,000 MoneyPass ATMs, there is no fee.
Chase, a much, much bigger bank than Chime only has 16,000 ATMs in the U.S.
Credit Card Fees
Not only do credit card companies charge a high-interest rate for customers who carry a balance, many charge a variety of fees too.
An annual fee is charged just for having the credit card. Not all cards have one, the ones that do include some secured cards (cards for those whose credit score is too poor to qualify for a traditional card) and some rewards cards.
The fees range from $20 a year all the way up to several hundred dollars. Rewards cards will often waive the annual fee for the first year you have the card.
Balance Transfer Fees
A balance transfer fee is incurred when you transfer the balance from one credit card to another. The fee is often 3% of the amount you transfer or $5, whichever is greater.
Cash Advance Fees
We described this in the overdraft fee section. If you use your credit card to withdraw cash from an ATM or use one of the checks that come with your credit card, you will be charged a cash advance fee.
The fee is typically 5% of the amount of the cash advance or $10, whichever is more. And remember, the interest rate on cash advances is higher than the rate for purchases, and there is no grace period before interest starts accruing.
Foreign Transaction Fees
A foreign transaction fee is charged when you make a purchase on your credit card in another country. And as I found out when I ordered something (I forget what now) from Canada, you and your card don’t have to be in the country to incur the fee.
The foreign transaction fee is usually 3% of the amount of your transaction.
It can happen to the best of us, paying our credit card bill just slipped our mind. You’re going to pay for it. A late payment fee can be up to $27. If you’re a repeat offender and have had a previous late payment in the prior six months, the fee can jump to $38.
Avoiding Credit Card Fees
Paying an annual fee for a credit card is not always a bad thing. If you don’t have a credit file or have poor credit, a secured card can be a good tool to build and improve your credit score. You can find secured cards with no annual fee though. Both Discover and Capital One offer them.
A rewards card with an annual fee can actually save you money, particularly a travel rewards card for those who travel frequently.
Some travel rewards cards include perks like free checked bags, free use of airport lounges, and reimbursement of fees for TSA Precheck ( a program that allows “low-risk” travelers to use an expedited security screening lane at certain U.S. airports) which costs $85, and Global Entry (a similar program that allows expedited clearance through U.S Customs) which costs $100.
If you’re not someone who travels a lot, there are plenty of credit cards, rewards cards even, that don’t come with an annual fee.
Similarly, paying a balance transfer fee can put you ahead.
If you have a balance on a credit card with a high-interest rate, you may qualify for a balance transfer card. You transfer the balance to the new card which has a 0% APR introductory period which can last for as few as six months to as many as 24 months.
This 0% period allows you to get your debt paid down without paying or incurring additional interest. A balance transfer can be an excellent tool to help you kill off credit card debt.
You can find balance transfer cards that don’t charge a fee including cards from American Express and Slate.
Do some math though before making a decision. If you have a lot of debt that is going to take a long time to pay off, a card with a longer 0% period that charges a fee may be a better value than a card with a shorter 0% period and no fee.
If you need a cash advance on a credit card and don’t want to pay a fee, you may have to join a credit union and apply for one of their credit cards, most traditional bank credit cards charge a cash advance fee.
Joining a credit union is definitely not a bad thing though! Credit unions typically offer better interest rates on deposit accounts and better rates on loans than banks. They also offer better, more personal customer service and fewer fees.
There are tons of credit cards, including travel rewards cards, which don’t charge a foreign transaction fee. If your current card does charge this fee and you’re planning a trip abroad, it will be worth it to apply for a card that doesn’t.
There is just one credit card that doesn’t charge a late fee, and that’s Citibank’s Citi Simplicity Card. Discover will waive the late payment fee on your first missed payment. Even if no credit cards charged a late fee, there are still consequences to paying your credit card bills late.
Those late payments are going to show up on your credit report, and that will hurt your credit score. In fact, late payments have the most impact of all the factors that go into determining your credit score, and they linger for a long time, up to seven years.
There are several ways to avoid paying your credit card bills late. The easiest is to set up autopay either through the credit card company or through your bank account.
I prefer never to let a vendor have access to my checking account to make automatic withdrawals, and I don’t recommend you allow it either.
There could easily be a mistake or fraud on your credit card bill that you don’t catch in time, and it could cause a much larger transfer than you were expecting. If the mistake were big enough, it could wipe out your checking account.
It’s better to set up the automatic payment to the vendor yourself rather than allowing the vendor to withdrawal the money.
The other option is to set up a system of reminders, so you don’t forget to make your payments.
Set a recurring monthly reminder on your phone. Schedule the reminder for a day or two before the due date and at a time when you’re able to take care of it immediately, so not during the time of day when you’re commuting or getting ready for work or otherwise preoccupied.
If you’re old school and don’t use the calendar on your phone, write down your due dates wherever you do keep your schedule, on your desk or wall calendar or day planner.
I find it easier to keep track of due dates when they fall on “even” days rather than having them scattered all across the month. Rather than have bills due on the 6th and 17th and 28th of a month, it’s easier if they fall on dates like the 1st, the 15th or the 30th.
It’s also easier to keep track of when bills are due if several are due at once, it’s also just more convenient. It’s fewer dates to keep track of and less time you have to spend sitting down to pay bills.
Not all vendors allow you to choose your billing date, but many do including credit cards and student loan servicers. If you choose this option, be sure the math works out. You don’t want all of your bills due at once if you won’t have enough money in your checking account to cover them.
If you get paid on the 1st and 15th of each month, you can split your bill due dates into two groups on those dates.
Don’t Fall For Fees
There is nothing Frugal For Less about paying unnecessary fees, and nearly all fees are unnecessary with the right bank, the right credit card, and the right amount of planning.
Just because a fee is only a few dollars is no reason to just accept it as part of the cost of living. As we showed, those fees can add up over time but so can your savings when you say no to fees.