July 16, 2020
Not to cause a panic, but do you know where your money is going? Besides rent or a mortgage, utilities, the phone bill, groceries and gas—does it feel like your checking account is dwindling, little by little? First it’s $2, then $10, $12, and $36. Suddenly your hard-earned dollars have disappeared, and it’s all going to these so-called service fees, ATM fees, and non-sufficient funds (NSF) fees that your bank is charging.
It’s no accident: U.S. banks earned more than $35 billion in service charges in 2019, and according to the Center for Responsible Lending, vulnerable account holders—primarily low-income families and people of color—bear the brunt of these fees. Banks know who they can charge and how they can make the most profit, so don’t beat yourself up. Let’s get you up to speed on what checking account–associated fees you should keep an eye out for and what you can proactively, or retroactively, do to right these wrongs.
What are they? Some banks charge monthly service fees—also called monthly maintenance fees—to maintain your account. In other words, you have to pay a few bucks each month just to have a checking account at certain banks, usually larger institutions. These fees hover around $5–$12, according to Cushion’s analysis of monthly service fees.
What can you do? The good news with service fees is that they’re fairly simple to avoid if you meet certain criteria, such as maintaining a minimum balance or direct depositing into your account each month. Not all banks charge monthly service fees, so if you anticipate you won’t be able to maintain the specified minimum balance, or you don’t plan to direct deposit into the account, consider shopping around for a fee-free bank.
Overdraft and non-sufficient funds fees
What are they? If you don’t have enough money in your account to cover an ATM withdrawal, debit purchase, online payment, or transfer, you’ll overdraft your account and receive either an overdraft fee or NSF fee, also known as a returned item fee. The two are quite similar, but there are important distinctions. If you’ve opted into overdraft protection, the bank will pay for the transaction and charge you a fee; if you haven’t opted into overdraft protection, have exceeded your overdraft protection limit, or have written a check to someone without adequate funds to process it, the bank will decline the transaction and charge you an NSF fee. Most banks cap the number of overdraft fees you can receive per day (typically between two and four); however, you could end up owing hundreds of dollars in overdraft and NSF charges per day after all is said and done. Then the cap resets tomorrow and you could owe even more.
What can you do? The first order of business is deciding whether you should opt into overdraft protection. One way to avoid overdraft fees is to simply not opt in. Bankers might tell you it’s in your best interest—and it certainly can be—but opting in can also do more harm than good. Read more about what you should know before opting into overdraft protection. The most straightforward things you can do to avoid overdraft and NSF fees are: keep a close eye on your account balance or sign up for low-balance alerts.
Unfortunately, overdraft and NSF fees can be inevitable. But fortunately, there is something you can do about it. You can sign up to have Cushion’s ⚛️ Fee Genius find and alert you about pesky overdraft and NSF fees so that you can contact your bank directly to dispute the charges. If you’d like Cushion to automatically negotiate your fees with high refund odds on your behalf, you can also opt into the 💭 Fee Negotiation add-on during sign up or from the Profile tab in your dashboard. Read more about how to get overdraft fees waived.
What are they? Your bank can charge you a fee if you make a withdrawal, deposit, or balance inquiry at an out-of-network ATM. In fact, you’ll often receive two fees: one from your bank and one from the institution associated with the ATM. When done outside of the U.S., an ATM fee will also include an international transaction fee, which adds a percent of the withdrawal to the flat rate. In the grand scheme of things, ATM fees are small, but you can receive a fee with each transaction, so they add up quickly.
What can you do? Sometimes you can’t get around ATM fees—if you need cash, you need cash. To cut down on instances you’d need to withdraw from an out-of-network ATM, find an in-network ATM nearest to your house, place of work, or wherever you might be traveling. If you’re traveling internationally, it’s best to withdraw a large sum of money rather than making several small transactions; the international transaction fee on your withdrawal will be higher, but you won’t have to pay multiple ATM fees.
Stop payment fees
What are they? When you’ve written a check or have an automatic payment scheduled to come out of your account but you change your mind or decide you can’t make the payment just yet, you can request that your bank stop it as long as it hasn’t processed yet. There is, of course, a fee involved, and it’s one of the highest bank fee charges, averaging $29 according to Cushion’s analysis. However, if the check or automatic payment scheduled to process is significantly higher, it can be worth the cost to stop the payment rather than allowing it to go through. This can be particularly helpful if you’ve sent a check for the wrong amount or changed your mind about a purchase. Stop payments typically expire six months after the initial request; if you want to extend, you’ll have to renew the request and likely pay an additional fee.
What can you do? Double check the information after writing a check and mark recurring payments on your calendar—these are simple steps to ensure you won’t have to stop a payment in the first place. But if you do, stop payment requests can usually be made over the phone, online, or in person at a branch. For services with recurring payments, such as streaming services and monthly utilities, you should contact the company you’re working with so they are aware of the stopped payment and won’t suspend your service. If you’ve written a check to someone and stopped the payment, notify them if possible and clear up any issues, such as a miswritten amount, so they can discard the check and you won’t have to extend the stop payment request after six months. A stop payment fee can be waived if you hold a premier account or meet other criteria set by your institution. A premier account means you do a bulk of your banking—such as checking, savings, investment, or loans—at one institution, so the bank will waive fees as a perk.
How can Cushion help me?
Cushion Bill Pay gives you more visibility and control over your finances than ever before. Many people get hit with bank fees—such as overdrafts and late fees—due to cash flow problems. With Cushion, you can consolidate and track all of your bills and BNPL payments in one place, plan your budget by reviewing what’s coming down the pike, and avoid overdraft fees by temporarily pausing payments that might overdraft your account and resuming them when you are ready.
Other frequent checking account fees
Paper statement and statement copy fees: Banks, often larger institutions, incentivize electronic billing when you open an account by charging a paper statement fee, or hard copy statement fee, between $2–$3. Sure, it’s more eco-friendly, and for the banks, they cut costs on printing and postage; however, electronic billing is not an option for all account holders. The National Consumer Law Center published a report in 2016 highlighting the risks involved with doing away with paper statements. A significant portion of the U.S. population—consisting primarily of seniors, low-income families, and people of color—does not have access to broadband internet to receive electronic statements, so it’s important to keep paper statements as an option.
Statement copy fees, though they sound similar, are slightly different. Some banks automatically bill electronically, so if you request a paper “copy” of your monthly statement, they will charge you—often even more than a paper statement fee ($5–6). Some banks, usually smaller institutions, will waive paper statement and statement copy fees if you maintain a minimum balance or meet other criteria.
Card replacement fees: If you misplace your debit card, you can be charged a fee for the replacement. Also called a lost or misplaced card fee, a card replacement fee won’t cost you a ton of money—typically $5–$7.50—but too many of them could be a burden. There are certain instances when you won’t have to worry about a card replacement fee, such as if your card was stolen, if the magnetic strip has worn out, or if your card has expired. Not all banks charge card replacement fees, but if your bank does, the fee can sometimes be waived if you meet certain criteria, such as if you hold a premier account.