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How Do I Avoid Checking Account Fees?

Nov 27, 2020
By Mariclare Cranston, Content Specialist

What are the best ways to avoid checking account fees?

No one wants to pay fees for their Checking Account, right? So, why do financial institutions charge them? And what can you do about them?

Believe it or not, some fees can be avoided simply by effectively managing your Checking Account. Let’s take a look at:

Why do financial institutions charge fees?

When your bank or credit union processes a transaction, there are associated costs on their end. They have to pay their vendors – the companies they use for processing – as well as the employees managing that process.

These costs are sometimes passed on, especially if you try to complete a transaction without enough money in your Checking Account to cover it. This is why it is so critical to effectively manage your account and stay on top of your available balance.

What are the most common Checking Account fees?

There are any number of fees that your financial institution may charge but three of the most common are Monthly Maintenance Fees, Nonsufficient Funds Fees, and ATM fees.

Monthly Maintenance Fees

Monthly Maintenance Fees, also referred to as Low Balance Fees, penalize you if your account balance falls below your financial institution’s required minimum balance. For example, if your bank requires a minimum balance of $100, you will incur a fee if your balance drops to $90. There are a couple of ways that banks and credit unions may calculate the minimum balance.

Minimum Daily Balance

If your financial institution requires you to keep a minimum daily balance, then you will incur the fee if your balance drops below that amount on any day throughout that month. If you bring your balance back above the required amount before the close of business that day, most financial institutions will not charge you the fee.

For example, let’s say you have a minimum daily balance of $500 and your current balance is exactly $500. If you withdraw $100, but then deposit $300 before the end of the day, your ending daily balance would be $700. In this example, you wouldn’t incur the fee. 

How can you effectively manage your Checking Account?
Get the ins and outs in this free Guide to Checking Account Management.

Checking Account Management

Average Daily Balance/Average Monthly Balance

Average daily balance is a little trickier. Banks and credit unions using this method will take your balance on each day of that month and divide it by the number of days in the month. If that number is above your required average daily balance, you will not be charged a fee.

Let’s say you have a minimum average daily balance requirement of $1,000. For the first 29 days of the month, your balance is $1,005. But on the last day of the month, you withdraw $950 leaving just $55 in your account. Your average balance turns out to be $933.33 and you would incur the fee.

($1,005 x 29) + ($55 x 1) / 30 = $933.33

Nonsufficient Funds (NSF) or Overdraft Fees

Nonsufficient funds charges (also known as Overdraft Fees) are another very common Checking Account fee. You will be charged this fee anytime you use more money than you have available in your account. These fees can add up quickly, especially if the person or business requesting payment makes multiple attempts to collect from your Checking Account.

According to Statista, the average NSF fee is $33.36. Even just three of these fees in one month means almost $100 in charges.

ATM Fees

If you use an ATM that’s not affiliated with your financial institution, the ATM Fees can end up hitting you twice. First, the owner of the ATM will charge you. Then, your bank or credit union may also charge you.

ATM Fees are sneaky. Because they’re often a smaller amount, you may not notice them. But after a month of using out-of-network ATMs, you may have racked up $20 or more in charges!

MHV offers over 118,000 totally-free ATMs across the country! No fee from us, no fee from the ATM owner. Just use the Location feature on the MHV Mobile App or on our website to find the nearest totally-free ATM.    

How do I avoid fees?

The good news is you can modify your financial behavior to help avoid certain fees. Here are the top 4 tips for avoiding fees.

  1. Stay on top of your balances. Managing your account and knowing exactly how much you have available to spend are the most important steps in avoiding overdraft fees. Get in the habit of using your financial institution’s mobile app or online banking to check your account balance before purchases. Don’t assume – very often we forget about pending payments or automatic bill payments.

Using a money management tool like myMoney Trail gives you an easy view of your spending, balances, and cash flow. See how it can help you. Show Me
  1. Pick the right Checking Account. If you’re having a hard time maintaining the required balance in your current Checking Account, start shopping for a new one. Many community banks and credit unions, including MHV, offer a Free Checking with no balance requirements. It may seem like a hassle to switch accounts and all of your associated bill payments, but if you’re saving money on fees it’s worth it. If you do switch, find out if your new financial institution has a Switch Kit to help make the change a bit easier to manage.
  2. Watch where you withdraw money. Tune in to the ATMs you’re using, especially if you frequently use ATMs outside of your bank or credit union. Ask your financial institution if they participate in any ATM networks, then stick to using those ATMs. Most financial institutions provide a listing of their network ATMs. MHV includes them on their website and within the MHV Mobile App by tapping locations.
  3. Set up overdraft from a Line of Credit. Struggling with nonsufficient funds fees? You may benefit from setting up a Personal Line of Credit to act as an overdraft option. When you have that established, your financial institution will pull money from your Line of Credit to cover purchases you make when you don’t have enough money in your Checking Account. While there is often still a fee associated with this service, it’s typically less than the NSF fee. Keep in mind that this is a safety net only. A Line of Credit is a type of loan and needs to be managed responsibly.

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