Do you know what bank fees you're paying? Many banks charge fees for behaviors that customers don't realize are costing them money. Among them are foreign transaction fees and, perhaps most surprisingly, fees for receiving paper statements.
Nessa Feddis, vice president and senior counsel at the American Bankers Association, says banks are imposing such fees because they're offering more services to the consumer—and these services cost the banks money. "When people say the number of potential fees has increased, it's kind of disingenuous," Feddis says. "We had limited services 30 or 50 years ago—there were no debit cards, no ATMs, no online banking—so there were less fees."
However, according to a 2011 Pew study, banks do not provide important policies and fee information in a concise and easy-to-understand format, making it difficult for customers to compare account terms and conditions among banks. An update to the Pew study this year found that the length of disclosure statements for checking accounts has decreased, but it's still at a median of 69 pages long. "They're still very dense, hard to read, and hard to understand," says Susan Weinstock, director of Pew's Safe Checking in the Electronic Age Project.
Weinstock adds that consumers want a bank's fees listed for them in an easily digestible disclosure box, which Pew has encouraged banks to create (Chase, TD Bank, and Citibank have adopted the box so far). However, with many banks not on board yet, "It's really hard to make an informed decision right now," Weinstock says.
U.S. News spoke to banking experts to shed light on lesser-known bank fees and provide ways to avoid them:
1. Early account closure fee.
Many banks require you to have your account open for a certain period of time before closing it, or else you get slapped with a fee. BB&T and Citibank charge a $25 fee if your account is closed within 90 days of opening it. Meanwhile, U.S. Bank, HSBC, and PNC Bank charge a $25 fee to close an account that has been open for fewer than 180 days. "There's significant cost to opening and closing an account, and the banks are trying to recover some of their costs," Feddis says.
Odysseas Papadimitriou, chief executive of credit card comparison website Cardhub.com, adds that banks impose early account closure fees to dissuade you from closing your account at all. "It's a way to deter people from closing their accounts, because after 90 days they're less likely to leave," he explains.
To avoid that early closure fee, you can keep your account open past the minimum period.
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2. Monthly or annual maintenance fee.
A number of banks charge monthly or annual maintenance fees for certain accounts. For example, a regular checking account at Bank of America comes with a $12 monthly maintenance fee. However, if you fulfill any number of requirements, such as maintain a minimum daily balance in checking of $750 or more, you can get the fee waived.
Check your bank's policy to see if you're being charged a maintenance fee and to find out ways to avoid it.
3. Minimum balance fee.
Some banks charge a monthly fee for customers with low account balances. For example, Citibank customers who have the bank's EZ Checking account are charged $15 a month if they don't carry a minimum balance of $6,000.
"We're in an environment of low interest rates, which means that the interest banks earn on their customers' money—especially the money they get on accounts with low balances—doesn't cover the costs of providing the account," Feddis says. She says that it costs banks on average about $300 a year to provide checking account services, so enforcing minimum balance fees is one way for banks to recoup that cost.
To avoid a minimum balance fee, review your bank's policy to see what amount you have to maintain.
4. Returned deposit fee.
If you deposit a check that bounces, your bank could charge a fee. Customers of Sovereign Bank are charged a $15 fee ($25 for an international check) when a check that's been deposited is returned unpaid. Similarly, Bank of America charges a $12 fee ($15 for international checks) for a returned deposit item.
A majority of big banks charge a returned deposit fee, but many small banks and credit unions don't tag on this fee, so it might be worth looking into changing where you bank if you think you're going to encounter a lot of bounced checks.
5. Foreign transaction fee.
If you buy something from another country with a U.S. credit card, the bank may charge you a conversion fee. For example, Bank of America generally charges a 3 percent fee on foreign purchases used with its credit cards. So for an $80 purchase, the bank charges a $2.40 transaction fee. With Bank of America, it's also important to note that even if a transaction is in U.S. dollars, the bank still applies a foreign transaction fee if it's processed outside the U.S.
"There's a greater potential for fraud with international transactions, so it costs the banks money to protect the consumer," explains Feddis.
If you want to avoid this fee, you can use any number of cards that don't charge for foreign transactions, such as Capital One's Venture and Platinum Prestige cards or Chase's Sapphire Preferred card.
6. Lost debit card fee
Accidentally misplaced your debit card? It'll cost you. Bank of America charges $5 to get a replacement debit card; PNC charges $7.50.
"There is a cost [for the bank] to providing a new debit card, and it's not just the manufacturing," Feddis says. "Banks also pay for the mailing and the fraud protection systems connected to the card."
In addition, some banks charge extra for rush orders, like PNC's $25 expedited delivery fee for a new debit card. To lessen the blow, you don't have to request expedited delivery on your new card—you can simply use cash for payments or a different card in your wallet until the new one arrives.
7. Paper statement fee
If online banking isn't your thing, receiving paper statements could be costing you. TD Bank offers a $1 discount on checking, savings, and money market account maintenance fees when you opt for online statements only. Meanwhile, U.S. Bank charges customers who opt for paper statements up to $2 a month on some checking accounts. Such paper statements are expensive to produce and they're not environmentally friendly, so banks try to dissuade people from getting them, Feddis says.
"The price of postage keeps going up, and it costs banks more than $1 to send a paper statement," Papadimitriou says. "If they do that once a month, that's a lot of money going out."
If you're being charged for paper statements, you have the option of searching for banks that don't charge the fee or looking into an account that enables you to bank entirely electronically.
8. Redeeming rewards points fee
A few banks have begun charging customers a fee for redeeming the points they've accumulated on their rewards cards. At Wells Fargo, for example, you have to pay a $24 processing fee for each airline ticket issued through the bank's rewards vendor. However, this type of fee isn't particularly common, Feddis says. Nonetheless, if you want to avoid paying for using your rewards points, Feddis says you need to shop around and compare various banks' policies.
9. Returned mail fee
When you move, a mail forwarding request with your post office may not be good enough for your bank. Many banks print "return service requested" on their envelopes, so your mail gets sent back to the bank if it can't be delivered, upon which a number of banks charge a fee. U.S. Bank, for example, charges a $5 fee for the second and subsequent months that a statement is undeliverable. Many regional banks also charge a fee for this: FirstBank & Trust, Bank of Arkansas, and Bank of Oklahoma charge undeliverable mail fees of $15.
"There's a potential for identity theft with returned mail, so it triggers other actions on the part of the bank that cost money," Feddis says.
These fees can add up, so make sure you update your address with your bank upon moving.
10. Human teller fee
Some banks even charge a fee for using a person to handle certain transactions. For a Bank of America eBanking checking account, there's no fee when you choose online paperless statements and make your deposits and withdrawals online or with an ATM. However, if you use a teller, you have to pay the monthly maintenance fee of $8.95. If you'd like the ability to consult a teller, seek out bank accounts that don't levy this charge. "It's easily avoided by choosing an account that aligns with your behavior," Feddis says.
Now that you are aware of these fees, you can take steps to avoid the ones putting a strain on your finances.
Clarified on 08/15/2012: An earlier version of this article misstated TD Bank's policy for paper statements. The bank offers a $1 discount on maintenance fees for certain accounts that don't receive a paper statement.