Bank accounts are important financial tools that help protect your money and even allow you to earn interest. But depending on where you bank — and how you use your account — certain fees can chip away at your balance. From monthly maintenance charges to overdraft penalties, these costs can add up quickly if you’re not paying attention.

Understanding the most common bank fees, why financial institutions charge them, and how to avoid them can help you keep more of your money.

Why do banks charge fees?

Fees serve as added revenue for banks. If a bank charges a fee for account maintenance or an optional service, the institution can put those funds toward operational expenses and even generate additional income — at the customer’s expense. After all, a bank is a business, and a business’s goal is to earn money.

Recent data shows that banks have become increasingly dependent on fees over the years, especially those charged for overdrafts and non-sufficient funds (NSF). In fact, according to the Consumer Finance Protection Bureau (CFPB), NSF and overdraft fees account for about two-thirds of a typical bank’s fee-based revenue.

6 common bank fees to watch out for

Even though consumer watchdog groups and the Consumer Financial Protection Bureau (CFPB) are keeping a close eye on certain bank fees, it means that these added costs probably aren’t going to disappear anytime soon. You can often find ways to avoid these fees altogether based on the accounts you choose and how you manage them.

1. Monthly maintenance fees

Monthly maintenance fees, also known as service fees, are commonly charged by banks to offset the administrative costs associated with servicing your account. They’re commonly charged for checking accounts and can range from around $5 to $15, though they may be higher for premium accounts.

How to avoid monthly fees

Many banks waive maintenance fees if you meet certain requirements, such as:

• Maintaining a minimum balance
• Setting up direct deposit
• Making a minimum number of monthly transactions

You can also consider switching to a no-fee checking account, or moving to an online bank where these charges are rare.

2. Overdraft fees

An overdraft fee occurs when you spend more money than you have in your account and the bank covers the transaction. Overdrafts represent short-term credit risk for banks, so these fees compensate for covering the transaction and processing the negative balance. Overdraft fees can be steep, too, typically around $30 to $35 per transaction. 

How to avoid overdraft fees

There are several steps you can take to avoid overdraft fees. 

First, you can opt out of overdraft coverage for debit card purchases. Instead of processing the transaction and covering the difference, the bank will simply decline any transactions that would put your balance in the red.

You can also consider linking a savings account or line of credit to your checking account for overdraft protection (which usually incurs a fee as well, though it’s often much less than an overdraft fee).

It also helps to keep a small buffer in your checking account in case an unexpected transactions comes through, and set up bank alerts to notify you if your balance drops below a certain threshold.

3. ATM fees

ATM fees typically occur when you use an out-of-network ATM. You may pay a fee from your bank, as well as an additional fee from the ATM operator.

How to avoid ATM fees

The easiest way to avoid ATM fees is to use in-network ATMs whenever possible. Another option is to choose a bank that reimburses ATM fees.

4. Excess transaction fees

Some accounts — particularly savings and money market accounts — may charge fees if you exceed a certain number of withdrawals (usually six) during a statement cycle. These withdrawal limits are less common today, but many banks still have them in place.

How to avoid excess transaction fees:

If your bank charges fees for excessive withdrawals, it’s important to plan your withdrawals carefully. Using a checking account for everyday transactions is the best bet. Then, consider making larger withdrawals or transfers from your savings when possible, rather than multiple smaller withdrawals throughout the month. You can usually rely on your mobile banking app to keep track of transactions.

5. Wire transfer fees

Wire transfers are fast electronic transfers used to move money from one bank account to another. They’re often used for large or time-sensitive payments. Domestic wires may cost around $15 to $30, while international wires can be even more expensive.

How to avoid wire transfer fees:

If the timing of your payment isn’t urgent, consider using a free option such as an ACH transfer or fee-free payment app. Some banks also offer free wires — particularly premium and business accounts — including Marcus by Goldman Sachs and Fidelity. So, review your account agreement to find out if your bank charges this fee or consider switching to one that doesn’t.

6. Foreign transaction fees

Currency conversion and international payment processing create additional costs for financial institutions, which is why foreign transaction fees are common. These fees typically apply when you use your debit card for purchases made in a foreign currency or processed through a foreign bank. They’re usually around 1% to 3% of the transaction amount.

How to avoid foreign transaction fees:

When traveling abroad, always opt to pay in the local currency when given the choice. And if you travel internationally often, consider switching to a travel-friendly bank account that doesn’t charge foreign transaction fees on debit transactions. 

How do I know which fees my bank charges?

Financial institutions are required by federal law to explicitly disclose any fees that are charged on depository or transactional accounts, such as your checking or savings account. These fees are typically outlined in an account disclosure, which you’ll receive — and perhaps even sign — when opening your account. You can also request a list of fees from the institution at any time.

If these listed fees (or policies surrounding those fees) change in the future, the bank is required to send an updated disclosure outlining the new changes and how they may affect you.