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Bank Fees Decoded: Learn the Lingo to Save Money

Oct. 17, 2017
Banking, Banking Basics, Banks & Credit Unions
Bank Fees Decoded: Learn the Lingo to Save Money
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Scanning your bank’s list of fees can feel like brushing up on the foreign language you took in high school. A few words look vaguely familiar, but their meanings are long forgotten.

With that in mind, we’ve translated a handful of bank fees and their rules into plain English. Understanding these terms can mean the difference between having an account that works for you, and one whose fees slowly drain your balance.

Overdraft fee

Translation: You can make your purchase even if you don’t have the cash, but it’ll cost extra.

You’ll pay an overdraft fee if your bank authorizes a purchase that pushes your checking account balance below zero. You can leave the store with the item, but you could owe as much as $39 for the privilege. Many banks limit overdraft fees to four or five per customer per day, and you must opt in for the service.

Overdraft protection fee

Translation: You pay to borrow money from yourself to make a purchase.

Most banks let customers link checking accounts to savings accounts or lines of credit. If your checking balance is too low to cover a transaction, your bank automatically pulls funds from the linked account. Some online banks and credit unions do this for free, but big banks might charge around $12 per transfer.

Nonsufficient funds fee

Translation: You don’t have enough cash for a purchase, and the transaction is declined — with a penalty.

You’ll pay a nonsufficient funds fee, or NSF for short, when there isn’t enough cash in your checking account to cover a transaction. This penalty is doubly painful: Your payment will be declined, so you won’t be able to make the purchase, and you’ll be hit with a fee.

ATM operator fee

Translation: You pay extra to withdraw cash from outside of your bank’s ATM network.

Using an out-of-network ATM could cost you around $2.50 — up to $5 if you’re abroad. And that’s just the fee your bank might charge; the operator of the ATM might takes its own cut.

Monthly maintenance fee

Translation: You pay for the right to park money at your bank.

If your bank charges a monthly maintenance fee, it’s essentially asking for rent of around $10 per month typically. But keeping your balance above a certain amount or receiving recurring direct deposits are the most common ways to get the monthly fee waived. Some institutions, including many online banks and some credit unions, don’t charge this fee.

Foreign transaction fee

Translation: You’ll pay to use your debit card overseas.

Using your debit card to make purchases or withdraw cash at an ATM abroad can lead to foreign transaction fees. These tend to range from 1% to 3% of the total transaction amount. You can avoid them by using a credit card that doesn’t charge this particular fee.

» Interested in learning more? We explain how to choose a no foreign transaction fee credit card

Excess activity fee

Translation: You’ll pay if you dip into your savings account too often.

Federal law limits the number of certain types of transfers and withdrawals from your savings or money market account to six per month. This includes overdraft transfers. You could owe as much as $15 for each additional transaction.

Early account closure fee

Translation: You’ll be charged for closing an account too soon after opening it.

Banks want to hold onto their customers for as long as possible, which might explain why some charge fees for closing an account after too short a period of time. If you signed up for an account for an alluring sign-up bonus, keeping it open for at least three months should help you avoid this fee.

Paper bank statement fee

Translation: You’re paying for physical copies of your bank statement.

You might owe a small fee, usually around $3 each month, for receiving paper bank statements. Consider enrolling in electronic statements, which you can receive via email and access at any time on your bank’s website.

Inactivity fee

Translation: You’ll be charged for not making any deposits to or withdrawals from your account for a few months.

If you haven’t used your account for the few months — or a year — you could owe an inactivity fee, or dormant account fee. It’s a good idea to close accounts that you no longer use.

Being fluent in bank fees can save you money, but it’s best if you don’t have to worry about them in the first place. Online banks, which tend to charge fewer fees than traditional brick-and-mortar banks, can make that a reality. However, they don’t offer some of the services afforded by branches, like in-person support and easy ways to deposit cash.

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