Chime® is a financial technology company, not a bank. Banking services, credit, and debit card provided by The Bancorp Bank, N.A. or Stride Bank, N.A., Members FDIC.
 

What Do Banks Do With All Those Outrageous Fees?

By Melanie Lockert
January 14, 2019

When it comes to your bank, you are basically entrusting a financial institution with your hard-earned dough. You want to keep your money safe and watch it grow, right?

Yet, get this: Banks often charge tons of fees that cost you money without you even realizing it. To help you better understand these bank fees, let’s take a closer look at all of the different types of fees – from overdraft fees, account maintenance fees, monthly maintenance fees and more. From there, we’ll examine what banks actually do with bank fees.

Monthly maintenance fee

Ah, the monthly maintenance fee. It can seem harmless at first – until you really think about it. Your “free bank account” isn’t really free when there’s an account maintenance fee involved.

Banks typically charge monthly maintenance fees when your account balance goes below a certain amount. In fact, Bank of America charges $14 per month in fees if your account balance falls below $1,500. While there are some ways to counter this monthly maintenance fee, you are generally required to have a certain amount of money in your account.

So, in other words, your bank is trying to tell you what to do and how to use their products. Not only that, but they decide on the account balance limit. What’s worse is that you’ll have to pay the price if you don’t play by the rules. And, you may not even realize there are monthly maintenance fees unless you read the fine print or suddenly see a charge hit your account.

Look at it this way: If you put your extra dough into an interest-earning savings account or you invest it, your money will grow. But parking it in a checking account with a hefty monthly maintenance fee won’t help you build wealth.

Overdraft fees

One of the biggest ways that banks make their money is through overdraft fees. Overdrafts happen when you don’t have enough money in your account to cover your transaction and your bank allows it to go through anyway.

If this happens, you could be hit with a $34 fee every time you overdraft. And, while legislation has improved since 2010 (banks now require consumer consent), overdraft fee are still unnecessary charges that can hurt a lot of people. In fact, the Consumer Financial Protection Bureau found that consumers who have opted-in frequently pay almost $450 more in overdraft fees.

For a bit of history, overdraft fees have been a huge money-maker for banks and that’s basically why they exist. According to data in the American Banker, banks that surpassed one billion dollar in assets collected a whopping 11.54 billion dollars in overdraft fees last year. Overdraft fees can turn a simple and affordable purchase into something much larger. According to Business Insider, a young adult had $1.68 in her account when she purchased fries and a drink for $4.32. Because she didn’t have enough in her account, she was hit with an overdraft fee of $35. Not only that, but she was charged $6 per day until she was able to deposit her paycheck and restore her balance. Suddenly a purchase of $4.32 turned into a $71 fiasco.

One way to avoid an overdraft fee is opt out of overdraft protection completely. Pro tip: If you never want to worry about these fees, bank with Chime and avoid overdraft fees forever.

ATM fees

When you need to get some cash, sometimes you opt for convenience and just withdraw at the closest ATM. While that’s convenient for you, you’ll end up paying for it in many cases.

According to Bankrate’s 2018 Checking Account Survey, ATM fees have peaked and are at the highest they’ve been in more than 14 years. On average, the cost of withdrawing money from an ATM that is out of your network is $4.68 — a 36 percent spike since 2008. That may not seem like much, but over time, it adds up. For instance, that one mistake just cost you the same price as a fancy cappuccino.

You can avoid ATM fees altogether by choosing a bank that has no in-network ATM fees and zero ATM fees for out-of-network transactions on their end. If you find a no-fee bank, just make sure you always read the fine print. Banks can change their policy at any time, leaving you in the dark. This happened to one consumer who made a switch and didn’t realize he was getting hit with fees until he checked his accounts.

Another unfortunate reality is that these ATM fees disproportionately affect low-income families who need every dollar they earn.

Foreign transaction fees

If you’ve ever traveled abroad, you know how important it is to access your cash. Yet, when you use a debit card or credit card abroad, you may be hit with a foreign transaction fee. This often amounts to about three percent in fees.

But, there’s good news. There are banks that have zero foreign transaction fees. This means you can enjoy your trip without worrying about racking up added costs. Chime, for example, has no foreign transaction fees at all.

Card replacement fee

Sometimes things happen and you lose your debit card. That’s life. When you want to replace your card, it should be easy and free. But most banks charge a $5 to $25 fee to replace your card. Paying that fee can hurt when you’re already frustrated about your missing card. The good news: Chime will replace your card at no cost.

What do banks do with these bank charges?

The average consumer pays $329 in bank fees each year. Multiply that by millions of customers, and you can see why banks are getting rich off of bank fees.

Besides lining their pockets, financial institutions use these bank charges to help pay for the brick and mortar locations, staff, and general overhead costs. Luckily for you, you don’t have to pay the price.

Getting a no fee bank account

At Chime, we believe that fees aren’t consumer friendly and we want you to keep your hard-earned cash, That’s why we have no fee bank accounts. These accounts come with no monthly maintenance fees, no overdraft fees, no foreign transaction fees. No fees at all. We got you covered. We have your back.


This guide is for informational purposes only. Chime does not provide financial, legal, or tax advice. You should check with your legal, financial, or tax advisor for advice specific to your situation. Your state or local unemployment agency is responsible for making all determinations on your eligibility for unemployment benefits. Please contact your state or local unemployment agency if you have questions.

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