You are currently viewing Fees, Fees, Fees: Why Banking Costs So Much

Fees, Fees, Fees: Why Banking Costs So Much

By Deborah Jeanne Sergeant

The average American pays $7 in banking fees every single month, according to a January 2022 CNBC story.

That doesn’t sound like much, but who wouldn’t want an extra $84 a year? 

These charges are for infractions such as overdrafts, insufficient funds and more.

CNBC Select offered a list of some of the most common banking fees: 

• monthly maintenance/service

• out-of-network ATM

• excessive transactions

• overdraft, insufficient funds

• wire transfer

• early account closing. 

Some business banking accounts receive charges for simply existing, ranging from $4 to $25 and some banks waive that fee with a minimum deposit amount or a minimum number of transactions.

Small businesses are especially prone to the $2.50 or more ATM fee, as many of these business owners tend to make smaller, more frequent purchases than large businesses. 

Avoid these fees by planning when your business will need cash and withdrawing it from the bank directly or from one of your bank’s own ATMs.

Excessive transactions fees sound like the bank punishes clients for using their services. By planning your payments better, such as working with vendors to aggregate them into fewer but larger payments, you could avoid this fee, which can range from $3 to $25 per transaction.

Overdraft fees, typically $35 per transaction, are usually the result of tight margins and poor bookkeeping. Keep a closer eye on your accounts and build in a small cushion for occasional slip-ups. Overdraft protection costs about $35, so weigh whether or not it’s worth it to your business.

Insufficient fund fees are also about $35 each transaction. Again, watch the balance when making purchases to ensure there’s enough funds available. If the bank charges this fee on the same day that you make a deposit, you may succeed in contesting it and having the fee waived. Some banks offer text notification for when your account is low.

Skip wire transfer fees—about $16 to $35—by using any of the online money transfer methods such as PayPal and other apps, including your bank’s own mobile app. These are typically low in cost and your bank’s app is likely free to use. But large amounts of money may require a wire transfer.

Many banks require 90 to 180 days between opening and closing an account to avoid the early account closing fee. Save yourself $25 by looking over your bank’s rules before you close the account.

It can also help to find the right products for your business’s needs.

“Each business and situation are unique,” said Jonathan Spilka, senior vice president and business banking business development manager at NBT Bank. “Our approach is to start with an in-depth conversation with each customer to understand the details of their business, including cash flow, customer needs, payment options and more.

“We also review the underlying details of the services they currently have, weighing the benefits against the costs to help identify the best mix of banking products and services that deliver convenience, security and value.”

Contesting fees may not be as easy as you think. If you believe you are in the right, be ready to provide proof such as screen shots to show when you made that remote deposit, for example.

“Lately, it’s been getting harder to avoid fees,” said accountant Brenda Weissenberg, owner of Affordable Business Solutions in West Monroe. “It’s almost impossible to waive fees.”

She recommends that business owners ask for their statements to arrive via email instead of postal mail, as many banks charge a fee for the latter.

Shop around for a bank that fits your business needs.

“Some banks will charge fees for everything,” said Tom Barkley, professor of finance practice at Syracuse University. “Some charge lower fees on certain things and make up their profits by charging higher fees on other things.

“Do your due diligence: these are the services I need. Which bank will provide the best service for a certain dollar level, a certain cost? You may find one that’s more expensive dollar-wise but provides better quality service, like they correct mistakes and pick up the phone right away. Some may take 24 hours to get back to you and you need an answer an hour ago.”