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4 Things Banks and Credit Unions Do You Might Not Know About

Nov. 18, 2016
Banking, Banks & Credit Unions, Checking Accounts, Savings Accounts
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Banks and credit unions continue to find new ways to both delight and confound customers. While lesser-known tools can make managing one’s funds easy, unexpected fees can eat into them without much warning.

Reading your bank’s fine print can help you avoid the bad surprises and take advantage of the good ones. Here’s what to look out for:

1. Charge lesser-known fees

Many people are familiar with certain charges, like monthly service fees. Either they’ve owed them in the past, or they’ve taken steps to avoid them.

But other fees, like those buried on Page 12 of your account disclosure, may come as more of a surprise. Knowing what they look like — and how to steer clear of them — will minimize the damage they inflict on your account. These fees include:

Multiple overdraft fees per day

The majority of banks charge overdraft fees, and most place caps on how many they can charge individual customers per day. But some institutions don’t have these kinds of limits, which could leave people owing hundreds of dollars for a single day’s worth of overspending. (The median overdraft fee is $35.)

Use online and mobile banking to monitor your balances, especially if your bank charges several overdraft fees per day. And if you were charged a fee, ask for a courtesy reimbursement. Your bank may stand firm, but there’s no harm in trying.

Extended overdraft fees

If your account is in the red for several consecutive days, you might owe an additional fee. This can range between $5 and $15, and typically kicks in after five business days.

To avoid this fee — and the original overdraft charge — check out your bank’s overdraft protection services. You might be able to set up automatic transfers between a linked savings account and your checking account. This typically costs between $5 and $10 per transfer, which is significantly cheaper than a standard overdraft fee.

» MORE: How overdraft protection transfers work

Early account closure fees

Let’s say you just opened a new checking account; its $150 sign-up bonus was too good to pass up. So good, in fact, that you overlooked its many fees. You close the account immediately, which triggers a $25 early account closure fee. That’s the price some customers pay if they don’t keep their account open for a certain period of time, typically around 90 days.

To avoid that scenario, be sure to check out an account’s features, services and fees before committing to it. If it’s too late, hang on to your account for a while longer and do your best to avoid its other fees.

» MORE: How to choose a bank account

Dormant account fees

An inactive account, meaning one that you don’t make deposits into or withdrawals from, can also trigger a fee.

Some banks charge a fee after only three months of inactivity, while others wait until a full year has passed. Some assess the fee monthly, while others charge it just once. Because it varies by bank, it’s best to take note of your financial institution’s policy.

2. Offer text banking and fraud alerts

Some banks and credit unions offer to send text alerts whenever your balance dips below a certain amount. That way, you’re notified whenever you’re dangerously close to overdrawing on your account.

You might also have the option of receiving a notification whenever a large transaction is made using your funds. You’ll be able to set that limit. If you spot a transaction that you didn’t authorize, contact your bank or credit union immediately.

» MORE: Fraud victims stress importance of taking action, staying vigilant

3. Enforce daily ATM withdrawal limits

Financial institutions typically place a daily cap on how much cash you can withdraw from an ATM. That way, if crooks get their hands on your debit card, they won’t be able to drain your account of all its funds. And come Friday or Saturday night, this feature can also double as a helpful budgeting tool.

4. Automatically renew CDs 

Once a certificate of deposit matures, some banks will automatically renew it for the same term length. This can be a hassle-free way of managing your savings. Or, if you had plans to transfer that money back into your checking account, it can be a real nuisance.

When you open a CD, jot down its maturity date. Otherwise, your funds may get locked away automatically in a new certificate. You could request to withdraw your money prematurely, but that would trigger early CD withdrawal fees.

Read the fine print to maximize your account

Avoiding unexpected fees and taking advantage of your bank’s most helpful services boil down to some pretty simple advice: Scour its fine print, and don’t hesitate to ask follow-up questions.

Tony Armstrong is a staff writer at NerdWallet, a personal finance website. Email: [email protected]. Twitter: @tonystrongarm.