Many banks charge a bank account maintenance fee, either monthly or annually. However, some institutions offer fee waivers if certain minimum requirements are met. These fees can get annoying if you incur them often, but there are several ways to avoid the extra cost. Understanding your bank’s specific policy on this matter is important so you understand the fees you’re being charged and how to avoid them, if possible.
Why Do Institutions Charge Monthly Maintenance Fees?
Does your bank charge a bank account maintenance fee? Many banks do, though not all. These charges occur periodically, generally either annually or monthly. It is important to note that, for some banks, there are ways of avoiding maintenance fees, often by maintaining a minimum balance that varies by institution or by depositing a certain amount via direct deposit from your employer. Certain financial institutions, particularly online banks or credit unions, rarely charge maintenance fees, if ever.
If you have a bank account, you’re probably aware that many banks charge their customers a lot of different fees, and a bank account maintenance fee is one such charge. Banks often need to charge these fees if the interest derived from the funds in an account doesn’t cover the cost of providing and maintaining the account. In this sense, it’s often useful to think of a bank account maintenance fee as, essentially, a minimum balance fee, even though some banks, like Citibank, may charge both. And, like a minimum balance fee, maintenance fees can often be avoided by maintaining a certain amount of money in your account. This amount varies by bank.
Some banks try to keep their maintenance fees minimal but require a high balance to avoid them; for example, US Bank charges between $6.95 and $8.95 per month but requires either a $1,500 balance or $1,000 in direct deposits to avoid the fee. Some fees are higher but are easier to avoid by maintaining a relatively low minimum balance. TD Bank fits this mold well, as its bank account maintenance fee is about twice as much as US Bank ($15 per month), but it requires only a minimum balance of $100 to avoid the charge. Knowing what your bank charges, if anything, and how to avoid it can help you save money in the long run.
If you’re wondering how else you can avoid a bank account maintenance fee, there are several ways aside from maintaining the minimum balance at a major banking institution. For one, online banks and credit unions generally do not charge maintenance fees. Also, even many large banks do not charge a bank account maintenance fee on their customers’ savings accounts. For example, SunTrust does not charge a maintenance fee for its savings accounts but charges $7 a month for its checking accounts. If you’re unhappy with your current bank’s maintenance fees, you can choose an institution that offers a fee structure you’re happy with.
What is a Monthly Maintenance Fee?
A monthly maintenance fee is a recurring cost incurred for having a bank account. Banks, credit unions, and online banks incur several costs for keeping customers’ bank accounts running. Most banks have a few requirements you have to meet to waive the monthly fee.
Monthly maintenance fees are more common for brick-and-mortar banks with higher overheads. These fees are prevalent for personal and business checking accounts.
Understanding Bank Account Maintenance Fees
Some financial institutions pass expenses onto consumers through these fees. It’s more common to see monthly maintenance fees for smaller accounts that don’t have as many funds. Every bank wants to make a profit, and monthly fees help in some cases.
The Impact of Monthly Maintenance Fees
Monthly service fees make it more expensive for account holders to access banking services. Banks make extra money from these fees but still charge other expenses, such as ATM and overdraft fees.
The good news is that more banks are backing away from monthly fees and are offering alternatives. For instance, you may be able to avoid monthly account fees if your account has a few hundred dollars in it. That may be enough to fulfill the minimum balance requirement.
Online banks are also forgoing these fees and are forcing traditional banks to be more competitive. You can find a great option without monthly maintenance fees if you consider mobile apps and fintech companies that offer banking services.
The Advantages and Disadvantages of Monthly Maintenance Fees
Should a bank’s monthly maintenance fees make or break the experience? These are some of the pros and cons to consider.
The Advantages
The advantages of monthly maintenance fees are minimal, but they exist in theory. Advocates can argue that these fees are a good idea since they increase a bank’s total funds. Those funds can then get reinvested into financial products that allow the bank to improve its offerings. However, banks generate large profits without monthly service fees, which makes this a moot point for the most part.
However, a high average monthly maintenance fee can encourage account holders to make larger deposits. The minimum balance requirement can result in customers saving more money to avoid additional fees. The fear of triggering the monthly service fee can also reduce the amount of withdrawals.
The Disadvantages
It’s an extra monthly expense that feels completely unnecessary. Many online banking platforms are removing monthly service fees and are making banking more accessible. If consumers can choose a bank with no monthly fees and a traditional bank like Wells Fargo that has monthly service fees, more people may gravitate toward online banking.
You will also have to keep more of your money in the bank to avoid monthly service fees. A business owner may feel cautious about tapping into extra funds that would bring their daily balance below the minimum balance requirement.
Banks make a lot more money when someone takes out a loan or gets a credit card compared to what they can collect from monthly service fees. With competition getting more intense, it seems like some banks are stepping over dollars to chase pennies.
Tips to Avoid Monthly Maintenance Fees
Consumers have several ways to avoid monthly bank fees. These are some of your options.
Opting for Online Services
Online banks have fewer fees in general and almost never have monthly maintenance fees. You might also get a higher rate for your savings account and access to better financial products.
Online banking services have less overhead since they don’t invest in thousands of commercial properties for their branches. Everything takes place online, and you can get cash from an ATM instead of a local branch. You can save money and get better features with virtual banks compared to traditional financial institutions.
Maintaining the Minimum Balance
Most banks with monthly fees offer an easy way out. You must have to maintain the minimum balance for your account. This balance is typically a few hundred dollars.
It’s possible to reach this requirement by saving some money each week and working on a side hustle. You don’t have to work the side hustle forever if that’s not what you want to do. A single month of side income may give you enough cash to exceed the minimum balance.
Regular Review of Fees
Banks lay out the terms and conditions the moment you open an account. However, not everyone reads them. Knowing the types of fees a bank charges and their policies for monthly maintenance fees can help you save money in the long run.
Considering Bundling Services
Having many checking accounts open at one time will spread your money thin. Allocating cash to many accounts, especially from different financial institutions, can increase the risk of falling below the minimum balance requirement. Bundling services allow you to put more of your funds into the same account rather than risking monthly maintenance fees for multiple accounts.
Review Your Budget
Staying on top of your expenses and trimming them when possible can help you stay above the minimum balance requirement. Monitoring your credit card bills and other statements can also get you closer to your long-term financial goals. Account holders can use general money-saving strategies like ordering in bulk and using annual plans instead of monthly plans to boost their bank accounts.
Get Started as a College Student
While this choice isn’t feasible for everyone, college students have an advantage in accessing no-fee bank accounts. Some financial institutions waive the fee for all college students regardless of their balances. Companies want to retain college students because they will likely need financial products like mortgages and personal loans in the future.
Alternatives to Monthly Maintenance Fees
You don’t have to pay monthly maintenance fees. There are a bunch of alternatives that can help you save money.
Switching to No-Fee Accounts
Some banks and credit unions offer no-fee accounts in addition to accounts with monthly maintenance fees. Switching your account can put less pressure on you to keep up with a minimum balance requirement.
You might get fewer features with these accounts. However, avoiding the fee can be worth it. A no-fee account also makes it easier to save enough money to fulfill the minimum balance requirement for a future account with monthly fees.
Using Fee-Free Banks and Credit Unions
Several banks and credit unions do not charge monthly fees for any of their accounts. These accounts are more common with online banks that have lower overhead costs. Online banks pass their savings onto consumers and can offer better deals than big banks.
You don’t have to stick with the same bank for the rest of your life if the experience is no longer the same. Moving funds to a quality bank that doesn’t charge monthly maintenance fees can save you more than 4100 per year.
Making the Most of Your Banking Experience
A good banking experience can get you closer to your financial goals and let you access capital when you need it. The best banks offer various products in addition to checking accounts. Many of the top banks provide mortgages, personal loans, investment accounts, budgeting tools, and other resources.
While many resources can strengthen a bank’s position, monthly maintenance fees can be a dealbreaker for some people. A sufficient minimum balance requirement can eliminate monthly service fees, but not everyone is fond of earning a lower interest rate on their money.
Many people want the flexibility to do as they wish with their money instead of storing it away in a low-yield checking account just to avoid a monthly service fee. Sure, the fees are gone, but you can make a higher return by putting the funds into a high-yield savings account or promising assets.
It’s important to consider your financial goals and situation before opening a bank account. Some people can fulfill the requirements to avoid monthly fees. Many banks have reasonable benchmarks that encourage people to save money and make larger deposits.
