How to avoid bank fees

Banks made over $15 billion in overdraft and service fees last year. Don't be one of the people contributing to that total.

Close up of a bank statement showing multiple $35 fee charges in red

The Anatomy of Common Bank Fees

The most common bank fee is the Monthly Maintenance Fee ($10-$15). Large banks charge this unless you maintain a minimum balance (often $1,500) or have a direct deposit. The second is the Overdraft Fee ($35). If you spend $1 more than you have, the bank 'loans' you the dollar but charges you $35 for the 'service'. This effectively means you are taking out a 35,000% APR loan. Finally, there are Out-of-Network ATM Fees ($2-$5 plus the ATM provider's fee). All of these are 'avoidable' costs that provide zero value to your life.

Switching to Fee-Free Banking

The easiest way to avoid fees is to leave the big, traditional banks. Online Banks (Ally, Marcus, SoFi) and Credit Unions almost always offer zero-fee checking and savings accounts. They don't have the overhead of retail branches, so they don't need to 'nickel and dime' their customers. Many online banks also offer ATM Fee Reimbursement, meaning if you use a corner store ATM that charges $4, the bank will put that $4 back into your account at the end of the month.

Tactics for Your Current Bank

Turn Off Overdraft Protection: This sounds helpful, but 'protection' is usually what triggers the $35 fee. Ask your bank to 'Decline' any transaction that exceeds your balance. Getting a 'Declined' message at a store is slightly embarrassing, but it's free.
Set Up Balance Alerts: Have your bank app send you a text or push notification whenever your balance drops below $200.
Direct Deposit: Even a small recurring direct deposit is often enough to waive the monthly maintenance fee at major banks.
Peer-to-Peer Apps: Use Venmo or Zelle to transfer money to friends rather than writing checks or using ATMs, which can sometimes trigger fees.

Professional Financial Hygiene

Review your bank statements every quarter for 'zombie' subscriptions and accidental fees. If you see a fee you don't recognize, call the bank immediately. Most banks will waive a fee once or twice a year if you are polite and have a good history with them. Every dollar you keep in your account instead of theirs is a dollar that can go into your savings.

Real Life Examples

Mrs. Williams

Teacher • $60k Income • 20% Savings Rate

Mrs. Williams switched to a local Credit Union years ago. She hasn't paid a bank fee in 20 years and has even earned interest on her checking account balance.

Mr. Johnson

Project Manager • $90k Income • 10% Savings Rate

Mr. Johnson keeps exactly $1,500 in his big-bank checking account just to avoid the $12 monthly fee. He's successful, but he's essentially giving the bank an interest-free loan of $1,500.

Mr. Smith

Sales Executive • $120k Income • 5% Savings Rate

Mr. Smith regularly pays $100 a month in overdraft fees. He views it as the 'cost of living,' not realizing he's paying thousands of dollars a year for poor cash management.