No one likes being taken advantage of, and that’s what it can feel like when you’re getting charged unnecessary banking fees. These fees usually aren’t small change, either. Big banks make trillions of dollars per year from them, and the average consumer pays $250 per year in overdraft fees alone.
For the people who pay those fees, Ramit Sethi recently posed a very blunt question — why do you keep using banks that rip you off? According to this finance expert, there is a simple solution. To stop getting hosed on common bank fees, stop using terrible banks.
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The problem with big banks
When Sethi refers to “terrible banks,” he’s talking about the big banks. Specifically, he mentions Bank of America, Chase, and Wells Fargo as ones to avoid. The largest banks have traditionally relied on fees to make money. In 2016, those three big banks raked in over $6 billion in overdraft and ATM fees alone.
These banks also charge monthly maintenance fees, meaning they cost you money just to have an account. You can get the monthly fee waived if you meet certain requirements, such as maintaining a minimum average balance or receiving enough qualifying direct deposits. Or, you could choose a bank that doesn’t make you jump through hoops to avoid fees.
To clarify, any bank, large or small, can charge these types of unnecessary fees. However, they’re more common among the big banks. Since those banks have the most clients and far more branches across the country than their smaller competitors, they haven’t needed to eliminate fees to compete.
Some of the big banks have cut overdraft fees or made changes to their overdraft policies recently. This change is in large part because the Consumer Financial Protection Bureau (CFPB) began efforts to crack down on overdraft fees in late 2021. But these banks still tend to collect too many unnecessary fees that can cost you money if you’re not careful.
You don’t need to get ripped off by banking fees
So, which banking fees should you avoid? All of them. If you’re paying monthly maintenance fees, overdraft fees, ATM fees, or any other kind of fee for your bank account, then you’re paying too much. There are too many fee-free alternatives out there to make this kind of expense worth it. Here are resources you can use to find a better checking and savings account:
If you shop around, you can find accounts with no monthly fees, minimum balance requirements, and even no overdraft fees. Most of these banks also reimburse you for out-of-network ATM fees.
The only real disadvantage is that the banks that have eliminated common fees tend to have a much smaller physical footprint. Some have a limited number of brick-and-mortar branches, and others have none at all. Although that’s certainly a drawback for those who like in-person banking, it’s a small price to pay to avoid fees. Also, many online-only banks prioritize customer service to make up for the lack of a physical presence.
Your bank account should be a safe place to manage and save your money. It shouldn’t be costing you money, and if it is, then it’s time to make a change.
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