Here's Why So Many People Pay Unnecessary Bank Fees Without Realizing It
For many Americans, bank fees are so routine they barely register. A few dollars here for dipping below a minimum balance, another charge there for overdraft protection or account maintenance and suddenly hundreds of dollars a year may be disappearing without much notice.
If you have eventually wondered why you don't have more money despite saving up and spending carefully, there's likely your answer.
Fortunately, experts have some answers for why you’re paying so many bank fees and how to cut some of them.
You’re Winning: You're Going To Build an Emergency Fund Even If Saving's a Struggle
Try It: Start Growing Your Net Worth With Smarter Tracking
Why Bank Fees Often Go Unnoticed
Many consumers are not intentionally choosing expensive bank accounts, according to LaQueshia Clemons, accredited financial counselor and founder of Freedom Life Therapy and Wellness.
“Many consumers pay bank fees without realizing it because modern banking is often built around automation, overdraft protection and small recurring charges that become normalized over time,” Clemons said.
Additionally, she said, most people are not checking their accounts daily, especially when they are already overwhelmed or financially stressed. Not noticing the fees can also be a matter of perception.
“A $10 or $35 fee may seem minor in isolation, but repeated fees over time can increase financial anxiety, reduce savings opportunities and contribute to long-term debt accumulation,” she said.
Big Banks Often Profit From Customer Loyalty
Another issue is that many customers stay with the same bank for years without realizing they could pay lower fees elsewhere, according to Brian Rellihan, certified financial planner (CFP) and enrolled agent (EA) with Wise Wealth Planners.
“I have found that online banking institutions often offer more competitive savings rates, yet many elderly clients remain loyal to their longstanding brick-and-mortar banking relationships,” he said.
Traditional banks often continue attracting customers despite offering weaker savings rates, as well.
Alex Quintana, founder of Arca Savings, said many major banks still charge monthly fees while paying almost no interest on savings.
“The top five banks by deposits in the U.S. — Chase, BofA [Bank of America], Wells [Fargo], Citi, U.S. Bank — all have monthly fees and minimum balance requirements on savings accounts while paying an average annual percentage yield (APY) of 0.01%,” he said.
Contrast that with high-yield savings accounts at digital banks and credit unions, which are paying something in the range of 3% to 4% these days, or even higher.
How Consumers Can Reduce or Avoid Bank Fees
To reduce or avoid bank fees, review account terms regularly. Clemons advised paying closer attention to recurring charges and account activity and discontinue services they don’t need for which they may be charged a fee.
She also noted that consumers may have more negotiating power than they realize.
“[M]any banks will reverse fees if customers call and request it,” she said.
Many online banks now offer high-yield savings accounts without monthly maintenance fees or minimum balance requirements, she said. Clemons pointed to Marcus, SoFi and American Express high-yield savings accounts as great places to look.
“All three are no fees, no minimums and are currently paying between 3.2% and 4.1% APY versus the standard 0.01% at the big banks,” she said.
For consumers willing to review their accounts, compare rates and question recurring charges, even a few simple changes could mean keeping far more of their money each year.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
More From MoneyLion:
How Middle-Class Earners Are Quietly Becoming Millionaires — and How You Can, Too
4 Financial Decisions Young Adults Make That Are Hardest To Undo