Bank Fees

What Are Bank Fees?

The term bank fees refers to any charges imposed by financial institutions on their personal and business customers for account set-up, maintenance, and minor transactional services. These fees may be charged on a one-time or ongoing basis. Examples of bank fees range from account maintenance charges, withdrawal and transfer fees, automated teller machine (ATM) fees, non-sufficient fund (NSF) fees, late payment charges, and others.

Understanding Bank Fees

Banks charge fees for the services they provide their personal and commercial clients — and they seemingly lurk everywhere. For instance, banks charge customers fees just to have certain deposit accounts open. In other cases, they may charge service fees to conduct transactions or as penalties for things like bouncing checks. Certain fees apply to all customers across the board, while others may be waived under certain conditions. Customers who have long-standing relationships and multiple assets and liabilities with a bank may qualify for a fee waiver.

All financial institutions must be transparent about their bank fees. There is a comprehensive disclosure of the fee schedule on bank websites and in the fine print of pamphlets. Customers must carefully read and review the disclosures to avoid surprises. While competition is a natural regulator of where a bank may apply fees and how much it thinks it can get away with, government authorities such as the Consumer Financial Protection Bureau (CFPB) and the Office of the Comptroller of the Currency (OCC) stand by to field complaints and concerns from the public about fee-charging practices by banks.

All financial institutions must be fully transparent and disclose their bank fees in writing, so make sure you read all the fine print.

Fees are listed on a customer's paper bank statements, passbooks, and/or through the institution's online banking portal. In most cases, banks will post fees at the time the transaction takes place. For other cases — such as bank account maintenance fees — the bank generally add them on at the end of the month.

While the majority of a financial institution's total revenue comes from net interest income, a big portion comes from bank fees. Individual fees may be small but when combined, they can add up quite nicely. When the net interest margin for a bank is squeezed in a low-interest-rate environment, bank fees provide a measure of stability to bank earnings.

Special Considerations

It's important for customers to keep an eye out on how much they spend on bank fees and, is possible, how to avoid them because they can add up. The national average for monthly checking account maintenance fees in the United States amounted to $14.13 or $169.56 for a year, according to Money Rates. That's the highest amount surveyed by the site in seven years. Keep in mind, this figure doesn't include things like overdraft fees, transfer and withdrawal fees, charges to use the ATM and others. To minimize the amount paid in fees, it's important to maintain monthly minimum balances, limit the number of withdrawals, avoid bouncing checks, and making credit card payments on time.

Types of Bank Fees

Here are some of the most common types of bank fees customers pay: