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How to stop giving money away to your bank

June 14, 2016

By Richard Barrington | MoneyRates.com Senior Financial Analyst, CFA

Bank fees and charges

Banks are not very popular with some Americans. So why do people keep giving away their money to banks?

According to a Gallup poll, less than half the people in the United States have confidence in their banks. Despite this, they allow banks to take their money in a variety of ways that are not necessary. In other words, people say they don't trust their banks yet they exhibit a sort of blind faith in them.

If you've been giving away money to your bank, it's time to stop.

7 ways you're giving away money to your bank

You might think that the last thing you would do is give money away to a bank if you did not have to.

Here are seven ways you might be doing exactly that:

1. Checking account maintenance fees

The most recent MoneyRates Bank Fee Survey found that 75 percent of all checking accounts charge a monthly maintenance fee. These fees average $13.29. If thirteen dollars doesn't sound like a big deal to you, think through the math a little further - $13.29 a month adds up to $159.48 per year.

Let's say you keep an average of $4,000 in your checking account. That means you would be paying nearly 4 percent a year for having a savings account. What's the alternative? How about paying nothing. Though they are in the minority, one in four checking accounts still charges no monthly fee. In particular, online checking accounts are more likely to have not monthly fees. Also, many banks will waive the fee if you maintain a reasonably high balance, and/or if you use direct deposit.

2. Savings account fees

Though they are avoidable, checking account fees are at least understandable - those accounts tend to have high activity levels and so they require a regular effort on the part of the bank. Maintenance fees on savings accounts are harder to justify, yet they are becoming more common. The thing is, savings accounts are designed to have less frequent transactions than checking accounts, so you are not really getting much service in exchange for a savings account fee.

What's worse is that with interest rates barely above zero, chances are that a savings account fee would exceed the interest you earn on the account. This is totally avoidable as there are still plenty of savings accounts that don't charge a monthly fee.

3. Overdraft fees

Banks will try to sell you on overdraft protection, but with fees of about $30 per occurrence, this service does more harm than good. By law, new accounts are supposed to be excluded from overdraft protection unless you opt in, so don't let yourself get talked into this high-cost service.

4. Out-of-network ATM charges

If you use an ATM that is not part of your bank's network, you can expect to pay twice for the privilege since both your bank and the bank that owns the ATM will charge a fee. On average, these fees add up to $4.60 per occurrence. On a $40 withdrawal, that would mean paying 11.5 percent just to access your money. When you choose a bank, an important consideration should be finding one with ATM locations that match your regular travels so you can avoid these fees.

5. Sub-standard interest rates

The average savings account interest rate nationally is 0.06 percent, but some banks offer rates in the neighborhood of 1 percent. If you have a choice between earning a dollar in interest or six cents, why would you choose the six cents?

6. Credit card interest

Though most interest rates are low these days, credit cards are an exception. The average credit card rate is 12.22 percent, but some rates can be twice that. To a large extent your rate will depend on how good your credit score is. However, in any case, shopping around can save you a substantial amount.

7. Early withdrawal charges for CDs

When you lock into a certificate of deposit (CD), you should know what would happen if you have to withdraw your money early. The fees banks charge for this vary, so check this and CD rates carefully before you commit to your next CD.

Banking is a business and it is not unethical for bankers to charge fees in exchange for services. At the same time, you should approach it as a business too, and not give away your hard-earned dollars when you could get the same services more cost-effectively.

Comment: Have you been impacted by these small ways you're giving away money to your bank?

More from MoneyRates.com:

6 little bank fees eating away your money without you noticing

Avoiding checking account fees

Should I deposit more to avoid a statement fee?

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