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Fees
In the last lesson you learned that banks and credit unions make most of their profit from earning more in interest from loans than they pay out in savings accounts.
But, that's not the only way banks and credit unions make money. Most banks and credit unions also make money by charging their customers fees, however fees vary greatly by institution so it's best to shop around and find a bank that best fits your needs.
For example, if you think you will use the ATM frequently, you should find a bank with no or low ATM fees.
Overdraft fees
Overdraft fees are charged when your balance goes below zero.
Fees can be as high as $36 per transaction so they can pile up in a hurry.
Some banks can provide overdraft protection by linking your checking account to a savings account to act as an emergency fund. Another way to avoid overdraft fees is to maintain a higher balance in your checking account.
Balance Fees
Another advantage to maintaining a higher balance in your account is to avoid minimum balance fees. Some banks will charge a fee is you fall below a certain balance, while others look at your average balance throughout the month. If it falls below a certain amount, you will charged a fee.
ATM Fees
While ATM usage is generally free if you use an ATM owned by your bank, you will pay an ATM fee if you use another bank's machine. Your bank may also charge a fee if you use your ATM too frequently.
Debit Card Fees
Likewise, debit cards generally don't have a fee, however some banks will only allow you to use your debit card a few times per month, and charge a debit card fee if used more frequently.
Paper Fee
Like most businesses, banks want to save costs. One way to do that is to encourage you to take advantage of electronic statements, and not receive a mailed statement each month. This saves the banks paper and postage.
Convenience Fee
Another way to save costs is to have less employees. Banks can hire less people if their customers don't come in the building. To encourage customers to use Mobile Banking services, they may charge a fee to bank in person. Usually this fee only applies after a certain number of visits each month.