What Fees Do Banks Charge and How Can I Avoid Them?

When it comes to your savings, account fees are a bad thing. Fees can eat away at your wealth over time and are essentially negative earnings. Unfortunately, many financial institutions charge a broad range of fees on checking, savings, and cash accounts. They do this for two main reasons: one, according to our estimate, banks need to make about $200 per client per year just to cover the cost to operate physical branches, and fees are one way to do this. And two, fees are a source of revenue. To make matters worse, the details of these fees are often buried in the fine print. In order to make the most of your money, it’s wise to avoid account fees whenever possible. Doing this requires understanding the fees you could be charged and then keeping your savings somewhere that won’t nickel-and-dime you.

In this post, we’ll explain some common fees banks charge on checking and savings accounts so you can better avoid them. The easiest solution, of course, is to keep your short-term savings in an account with no account fees at all, like the Wealthfront Cash Account. (You can further maximize your short-term savings by choosing an institution that pays a high APY.)  If you keep your cash at another institution, here are some fees to watch out for:

Monthly maintenance fees

Monthly maintenance fees are just what they sound like—they’re monthly fees you pay your bank in exchange for having a checking account. You’re more likely to get charged maintenance fees if your account balance falls below a set minimum or you don’t have direct deposit set up. Because you pay these fees on a monthly basis, they add up quickly.

In a recent survey, MoneyRates found the average monthly maintenance costs for checking accounts were $13.95, which adds up to nearly $170 each year. Unfortunately, even though free checking accounts have become more common than they were a few years ago, the majority of accounts in the survey still charged a monthly maintenance fee.

Overdraft fees and insufficient funds fees

Many banks charge fees when you withdraw more than your available balance from your checking account. If your account comes with overdraft protection, your bank will cover the difference, but then charge you a sizable overdraft fee. If your account doesn’t come with overdraft protection, the transaction won’t go through and you’ll likely get charged an insufficient funds fee, even though the money never left your account.

According to MoneyRates, overdraft fees cost about $30.82 on average. While this number has trended down slightly in the recent past, these fees remain a big source of revenue for banks. Fortune reported that overdraft fees alone cost Americans almost $11 billion last year.

Excess activity fees

Until April 24, 2020 the Federal Reserve’s Regulation D limited the number of withdrawals and transfers you could make from any savings account (or money market account) to six per month. If you exceeded this limit, your bank would often charge you a fee to discourage you from doing it again. However, the Fed suspended this rule in the early days of the pandemic to make it easier for people to access their savings in difficult economic times. 

Despite the fact that Regulation D’s limit is not currently an issue, many banks continue to charge excess activity fees for what they consider to be too many withdrawals. Depending on your bank, excess activity fees could cost as much as $10 per transaction. 

Stop payment fee

If you write a check and it gets lost or stolen, you’ll need to stop payment on it. This service, like many offered by typical banks, doesn’t come for free—in fact, large banks will sometimes charge as much as $30 to stop payment on a check.

Something else to consider: stopping payment on a check usually lasts for six months. After that, you may need to pay an additional fee to renew the stop payment.

Deposited item returned fee

If you’ve ever deposited a check and had it bounce, you know what a frustrating experience that can be. First of all, the funds aren’t deposited to your account. Second, you might owe your bank a returned deposit fee. If this sounds unfair to you (after all, you didn’t write the bad check), you’re not alone. Unfortunately, deposited item returned fees average about $13 per returned item (assuming the check is domestic), according to a recent analysis by MyBankTracker.

Paper statement fee

In all likelihood, your bank has encouraged you to go paperless with your monthly statements. That’s because sending paper statements costs money. Some banks charge between $1 and $5 a month just to send you a hard copy of your monthly statement. 

Card replacement fee

Mistakes happen, and losing your debit card can be an expensive one. Many banks charge what are known as card replacement fees in the event that your card is lost or stolen. MyBankTracker studied these fees and learned that some banks charge as much as $30 to replace a lost debit card. 

Protect your cash from fees

Unfortunately, details about account fees can be difficult to find and decipher when you open a new account. The easiest way to avoid account fees is to keep your cash at an institution that doesn’t charge them—then you should never be surprised by a line item on your monthly statement. Wealthfront’s Cash Account charges no account fees, ever. We do this because we believe in building a financial system that benefits people, not institutions—and that means letting you keep your hard-earned cash, not chipping away at it. (It also helps that we don’t have an expensive network of physical branches to maintain.)

The Cash Account doesn’t charge:

• Monthly maintenance fees 
• Overdraft and insufficient funds fees 
• Excess activity fees
• Stop payment fees
• Deposited item returned fee
• Paper statement fees 
• Card replacement fees

In addition to being completely account fee-free, the Wealthfront Cash Account offers:

• A high APY (currently 5.00%) so your cash reliably earns more
• Unlimited fee-free transfers to external accounts 
• Up to $8 million in FDIC insurance through our partner banks (32x what you’d get at a traditional bank)
• The ability to invest in an award-winning¹ Wealthfront Investment Account within minutes during market hours when you’re ready to save for the long term

Whether you’re saving up an emergency fund, building your down payment, or keeping cash handy for regular expenses, our Cash Account is an ideal place to keep your short-term savings.