Aaron got paid for a side cabinet job last week.
The check he received was issued from an account with Bank of America. We don’t bank there, but he was near one of their branches, so rather than deposit the check, he decided to cash it instead.
Some of you may know this, but if you try and cash a check at another bank, they will charge you a fee, even if the check was issued from their bank.
Aaron isn’t the type of person to take this type of “robbery” (which it really is), so he insisted on speaking with a manager. The manager wouldn’t reverse the fee either, so Aaron asked for the check back.
As he was leaving, he let the manager know that he would never bank with them. The manager responded by say, “it doesn’t matter, you don’t bank with us anyway.”
Needless to say, we will never bank with Bank of America.
I worked in commercial lending for 4 years shortly after graduating from college, so I wasn’t exactly shocked to hear about this charge.
Banks are in the business of making money. Federal regulations have closed a lot of their traditional money making schemes, so they have moved into the business of collecting fees.
According to the Consumer Federal Protection Bureau (the entity responsible for ensuring that banks and other leading institutions treat consuming fairly) of the 628 banks that are required to report overdrafts and NSF fees separately a total of $3.87 trillion dollars was collected in 2015.
Thank about that number for a second.
Keep in mind that this is only the larger banks, with over 1 Billion in assets that are reporting these numbers. These two fees alone averaged out to be 8% of the bank’s total net income.
Check out the article here – New Insights on Bank Overdraft Fees and 4 ways to avoid them.
I don’t begrudge banks the ability to make money. My issue is with what I like to call
My issue is with what I like to call “Fee Gouging”. If there is a possible way to charge you extra, your bank is going to find a way to do it.
So how can you prevent all of these random charges for hitting your bottom line?
I’ve outlined 5 simple ways to avoid banking fees
1. Review your bank accounts weekly or at a minimum review your monthly statements
I check my accounts almost daily. I’m not necessarily looking for bank charges, but I do like to know what is happening and to catch issues early. I’m obviously a little bit overboard, but I highly recommend checking your accounts on at least a weekly basis.
It only takes a few minutes to log in and look through your recent transactions. This not only helps find potential banking fees but can help avoid regular fraud. I also believe it helps with the budgeting process.
The more aware you are of your account balances the more diligent you will be in managing your money.
At minimum, you should be regularly reviewing your monthly bank statements.
When reviewing your accounts, look for unusual fees or anything that is abnormal. Banks tend to be fairly sneaky about their fees.
2. Read your banks disclosures
I know, disclosures are the most boring thing in the world. However, by law, banks are required to highlight the fees and clearly state them in the disclosures.
Typically the fees are found as either a separate attachment or at the end of a 30-50 page document.
Here is a link to the Chase Bank fees for their standard checking account.
If you have never taken the time to review a bank fee statement I highly recommend taking a look. I think you’ll be shocked at some of the stuff they will charge you for.
For example, did you know that Chase Bank can charge you $6 for copies of your statements or $5 for a rush on a replacement debit card? An overdraft fee alone is $34 for each overdraft (with a maximum of 3 drafts per day).
If there is a way to assess a fee on an account the banks have found a way to do.
Be aware of what fees your bank can assess and learn how to avoid these actions.
3. Plan in advance (know your finances)
The easiest way to avoid fees is to know what services the bank will charge you for and plan accordingly.
I have a savings account linked to my checking account.
The bank is authorized to pull from this savings account to cover any overdrafts. I monitor my accounts pretty closely, but I’ve still had a few times when I’ve made a mistake or had something cleared sooner than expected and had to dip into my savings account.
I recommend not using your emergency fund for overdraft protection. You don’t want to give the bank too much authority to pull funds.
I personally keep $1,000 in my overdraft savings account. This is enough to cover most of the mistake I make, but not so much that it will clean me out if fraud occurs on my account.
As mentioned earlier one of the bank’s biggest money makers is overdraft fees.
I know that occasionally life happens and mistakes are made. However, if you follow a budget and manage your money your changes of over-drafting decrease significantly.
Many banks require you to have direct deposit or a minimum balance in your accounts. Most people receive direct deposits, so this is relatively easy to avoid, but if for some reason you stop receiving direct deposits you need to contact your bank immediately to negotiate a reduction in fees until you get the issue resolved.
4. Refuse to pay fees
If you do see fees in your account immediately contact the bank and ask to have them reversed. Most of the time the bank will reverse the fees if asked, but they will never do it on their own.
If you have issues getting the fees reversed, don’t be afraid to move up the ladder and get a manager involved.
You’ll find that if you are polite but firm, most bankers are happy to help. They understand your concerns and for the most part, don’t want to charge the fees either.
5. Choose your bank wisely
One of the easiest ways to avoid fees is to choose your bank wisely.
Personally, I love small regional banks or credit unions. When you have a personal relationship with your banker the chances of avoiding fees are significantly higher.
Recently I made a mistake.
I moved virtually all of my money out of one of my business accounts in preparation to close it. I got sidetracked and didn’t close it as quickly as I intended and an auto debit hit the account in the meantime.
Because I know the banker personally, she called me for two days in a row trying to give me a heads up that my account was overdrawn.
She knew I had money in another account with their bank, but since it wasn’t linked, the funds didn’t pull automatically.
I was able to make the transfer and fix the error. Because of my relationship with the bank, they waived the fees even though it was 100% my fault.
This type of service is rare in banks and because of this and other similar help over the years on a business level, I do a lot of banking though Bank of Arizona.
Most banks have similar fee structures, but if they have an emphasis on customer service their attitude will be significantly more forgiving.
Why banking fees matter
Banking fees can easily eat away at your bank balances. Many people never even notice the little $2-15 fees that appear in their accounts each month. Most people notice the larger fees, but forget that the little ones can easily add up.
There is a reason that banks continue to charge these fees. If enough people pay those little monthly fees the banks will continue to have record breaking profits each year.
There is no reason for you to let banking fees eat away at your bottom line.
Take the time to do your research, manage your funds properly and pay attention to your personal finances. By doing these simple things you’ll avoid paying the crazy fees that everyone else gets stuck with.