A bank is a place where you put your money and let it grow, right?
Even though you can earn returns by keeping your money in an interest-bearing account, the reality is that banks can cost you money, too. Banks have clever ways to boost their bottom line — at your expense. Here are some of the hidden bank fees you should be aware of:
1. Monthly maintenance fees
Are you paying a monthly fee just because the bank is holding your money? According to a survey from online banking platform MemoryBank, 20 percent of respondents didn’t know their bank charged a monthly maintenance fee.
Read the fine print of your account agreement. Even if your bank claims not to charge fees, it might be contingent on maintaining a minimum balance or completing a certain number of transactions each month.
There are plenty of banks and credit unions that are truly fee-free. Double-check your own account to see if you really are avoiding fees.
You might not realize your bank account comes with maintenance fees if you’re meeting the requirements by default. But what happens if you dip below the minimum or you don’t make the same number of transactions one month? You could be in for a rude awakening.
2. Overdraft and overdraft protection fees
If you spend money you don’t have, your bank wants to ensure that the purchase goes through. It’s in the interest of banks to allow you to keep spending because they make big money from overdraft fees.
The Consumer Financial Protection Bureau (CFPB) reports that banks made $11.16 billion from non-sufficient fund fees in 2015. That’s 8 percent of the banks’ total net income, says the CFPB.
Even if you set up overdraft protection, you likely won’t be saved from fees. The CFPB points out that many banks charge a fee to move money from a linked account into your overdrawn account. The fee is usually smaller than a per-item overdraft or a returned payment charge, but it’s still money down the drain.
Some banks offer a line of credit as overdraft protection. If you overspend on your account, you likely won’t be charged a fee. Instead, the money is moved from a revolving line of credit. You must pay off the balance on your revolving credit account, or else you could end up with interest charges.
3. Processing debits before credits
The order in which a bank processes your transactions can make a huge difference in whether or not you end up with insufficient funds. You might assume that banks simply process your transactions in the order they take place. However, according to The Pew Charitable Trusts, some banks actually process debits first.
Say you have $100 in your checking account. You deposit $75 and then head to the store and make a purchase for $125. You shouldn’t have to worry about an overdraft charge, right? Not if your bank prioritizes debits over credits.
Everything is “pending” until the final process of the day, at which point your debits are all subtracted from your account and then the credits added. With this method, chronological order doesn’t matter. So, your $125 is taken first, meaning you have an overdraft. You now owe $25. If your bank charges an overdraft fee of $35, you’re $60 in the red.
Only after that is your $75 deposit applied. You think you have $50, but in reality you have $15 in the account. Unless you’re paying attention, you could easily find yourself overdrawn again the next day when you make a purchase.
4. Holding your deposits
It’s not just about the order of your transactions. Sometimes, according to the CFPB, a bank will hold a portion of your deposit. You might deposit a check for $400, but a portion of that might be held until another day. Here’s what the CFPB says about this practice:
“Generally, if you deposit a check or checks for $200 or less in person to a bank employee, you can access the full amount the next business day. If you deposit checks totaling more than $200, you can access $200 the next business day, and the rest of the money the second business day.”
Make sure you understand what “end of the day” means, too. The CFPB says that banks and credit unions can make the cut-off time as early as 2:00 p.m. at a branch’s physical location.
Find out your bank’s cut-off time. If you show up with a check at 2:30 p.m., you might have to wait longer to access all of your money. In the meantime, you could be subject to an overdraft fee if you spend more than what’s available.
5. Canceled check images
Consumer advocate Teresa Mears, the founder of Living on the Cheap, says that there are plenty of little ways for banks to nickel-and-dime consumers. However, one of the worst small-fee offenses in her book is charging you to see images of canceled checks on your paper statements.
“They tell you that you can see an image of your canceled check, and they charge you for it,” she says. If you still write checks on occasion, keep your own records. You don’t want to be charged bank fees just to double-check the payee on a canceled check.
Of course, check use is on the decline. According to payment solutions company WePay, 52 percent of millennials never use checks. This fee might not be a problem in the future as checks continue the march towards extinction.
It’s possible to avoid hidden bank fees
Bottom line: pay attention.
Know that sneaky hidden fees are one way banks make money. Read the fine print and check your bank statements when they arrive. Because you can access your account balances online and on your phone, you may miss out on the details that show up on a statement.
Your bank’s website should have copies of your statements and bank fees. Check these to make sure you understand what you’re getting into — and avoid costly surprises later.
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