If you’re looking for a way to manage your money more effectively, you’ll need a bank account. While a single checking or savings account can give you some momentum, it’s common for people to open multiple accounts as their goals become more complex. However, you can incur fees on any bank account. It’s good to know how much a bank account can cost before opening your first or next account.
Understanding Bank Account Fees
Bank accounts have several fees, such as overdraft fees and monthly maintenance fees. Each bank has conditions for avoiding fees. For instance, you will never pay overdraft fees if you keep your bank account positive. In addition, most banks that charge monthly maintenance fees waive this cost if you have a balance that is high enough.
Why Knowing the Costs is Important
Knowing how much it costs to open and maintain a bank account can help you determine if it makes sense to get started with a financial institution. While most banks don’t charge an upfront fee for opening a bank account, you can compare online banking options to get a better deal on other fees.
How Much Does It Cost to Open a Bank Account?
It usually costs nothing to open a bank account. Fees show up long after you have opened your account.
Types of Bank Accounts and Their Costs
These are some of the bank accounts you will likely encounter on your banking journey.
Checking Accounts
It doesn’t cost any money to open a checking account. However, some banks may require an initial deposit to get started. Most initial deposits do not exceed $100, and it’s common for banks not to make this request.
Checking accounts are useful for accessing cash quickly. You can also make an unlimited number of withdrawals without incurring any fees. However, checking accounts tend to have low APYs.
Savings Accounts
Savings accounts have the same initial setup as checking accounts. You won’t have to pay any money to set them up but can end up paying fees in the future. Some banks require initial deposits for savings accounts.
You can also incur fees for a savings account if you make more than six withdrawals per month. Every additional withdrawal may result in a small fee, but some banks have stopped charging this type of fee for savings accounts. These accounts have variable APYs that exceed what you’ll find with checking accounts.
Money Market Accounts
These accounts are also free but may have higher initial deposit requirements than checking and savings accounts. Many financial institutions require that you have a high balance to receive the maximum APY from a money market account.
Money market accounts have check-writing privileges, but you’re also typically limited in how many withdrawals you can make each month before incurring a small fee for future withdrawals over the course of a month. Money market accounts have variable APYs.
Certificates of Deposit (CDs)
CDs usually have high minimum requirements but do not cost money to open. However, you may end up with a penalty fee if you withdraw funds from a CD before the account matures. CDs offer fixed interest rates for a specified duration, which means you get to secure a rate regardless of what the Fed does next. CD terms range from three months to 10 years, and you can select the term length before committing to a CD. These accounts do not have monthly fees.
Specialty Accounts
Specialty accounts also tend to be free to open. Fees vary for each financial institution and also depend on the type of specialty account.
Common Bank Account Fees
Consumers are likely to encounter several banking fees during their lifetimes. These are some of the most common costs to expect.
Account Maintenance Fees
Some banks charge monthly service fees just to keep your personal checking account open. This fee is usually reserved for bank accounts with low balances. Many financial institutions waive this fee if you have a sufficient balance. You can find several online banks and fintech companies that do not charge account maintenance fees.
Minimum Balance Requirements
You may have to fulfill a minimum balance requirement to avoid additional fees. This requirement varies for each financial institution, and it’s common to find online banks that do not have any minimum balance requirements.
ATM Fees
Some banks charge ATM fees the moment you begin to use them. Others reimburse some of your ATM fees each month. You can also find an online bank with a fee-free ATM network consisting of more than 65,000 ATMs.
The number of fee-free ATMs doesn’t matter if none of them are located near you. Many banks let you access a map on the mobile app that lets you see where the fee-free ATMs and branches are located.
Overdraft Fees
You incur overdraft fees if you spend more money than what you have in your balance. A bank will let you overdraft your account, but you will incur an overdraft fee for doing so. Overdraft fees can be as high as $35 and vary for each financial institution. Some banks give you a small buffer before overdraft fees start to accumulate.
It’s important to make your bank account balance positive as soon as possible if you incur any overdraft fees. You can receive additional overdraft fees when you make purchases and when you have a negative balance. A bank can also close your account within six months of its remaining overdraft. If a bank closes your account, you must still pay off the overdraft balance. The remaining debt will go to a debt collection agency. It’s best to avoid that scenario.
Transfer Fees
Transfer fees are exclusively for wire transfers. These fees can range from $0 to $50 depending on the bank and whether the wire transfer fee is domestic or international. International wire transfer fees are higher than domestic transfer fees in most cases. Transferring money between bank accounts within the same financial institution does not cost money.
Inactivity Fees
Some banks charge an inactivity fee if there isn’t any activity within a checking or savings account for a specified duration. You should check your bank’s terms and conditions to see if it charges an inactivity fee and how much it costs.
Comparison of Costs Across Different Banks
Your banking costs vary depending on the type of bank account you choose. However, costs also depend on the type of banking model you use. Here’s how costs vary.
Traditional Banks vs. Online Banks
Traditional banks are almost always more expensive than online banks. Brick-and-mortar banks have more overhead since they have to pay costs for each of their locations. These financial institutions use fees and other expenses to cover their expenses.
Since online banks have fewer overhead costs, they can be more lenient with their fees. Online banks also tend to have higher APYs for their checking and savings accounts. These service providers use their savings to make more compelling offers to potential customers.
Major Banks’ Fee Structures
You can review the terms and conditions to see banking fees for any account before opening it. You’ll see many of the fees mentioned earlier with varying costs.
Credit Unions
Credit unions are nonprofit entities, which gives you an advantage with fees. While credit unions often have various banking fees, these fees tend to be smaller and easier to waive. You can also find more generous minimum deposit requirements.
You should compare fees with multiple credit unions before deciding on the right one for you. You must be a member of the credit union before you can open a checking or savings account.
Additional Costs to Consider
Costs vary on the most common fees, but there are a few costs that may also come up if you compare enough bank accounts. These are some of the additional expenses that may show up in your banking experience.
Initial Deposit Requirements
Some banks require that you put money in your account before opening it. This initial deposit requirement involves setting up a payment method, such as a bank account from another financial institution. You will have to make this initial deposit before finalizing the setup of your account.
Optional Services and Their Fees
You may come across optional services that can enhance your banking experience. However, some of these optional services also have fees that will increase the cost of banking. Overdraft protection is an optional service for some financial institutions. It’s possible to avoid overdraft fees entirely, but orders will get declined if you don’t have enough funds in your account. Optional services vary for each bank.
Foreign Transaction Fees
You may have to pay an additional fee for each foreign transaction in addition to currency conversion costs. Some banks waive this fee, but it can be equal to a small percentage of the transaction’s dollar value.
Ways to Minimize Bank Account Costs
You don’t have to end up with a steep bill just to own a bank account. There are several ways to keep your banking costs low and avoid most of the fees.
Searching for No-Fee Accounts
Some bank accounts come with little or no fees. You’ll have an easier time finding these types of accounts if you look for accounts offered by online banks and fintech companies.
Meeting Minimum Balance Requirements
It’s possible to avoid monthly maintenance fees just by maintaining the minimum balance requirement. Always keeping enough cash on hand will help you avoid a recurring banking fee. Reviewing your expenses can help you budget more effectively so you aren’t running too close to the minimum balance threshold.
Taking Advantage of Promotions
Some banks offer initial promotions when you open an account. These promotions can include earning $200-$300 if you maintain a minimum balance for a specified amount of time after opening your account. Some banks also waive an overdraft fee the first time you incur one. Promotions vary for each financial institution, and it’s good to compare each one before opening an account,
Utilizing Online Banking Features
Online banking features can help you save money. For instance, you can use a digital wallet to initiate purchases instead of withdrawing cash from an ATM. It’s also possible to fund your account quickly with a mobile check deposit if you received a paycheck. Receiving cash sooner may be the difference between seeing your balance positive and avoiding an overdraft fee.
Conclusion: Making an Informed Decision on Bank Account Costs
Bank account fees are frequent. You can see a list of a bank’s fees before opening an account. Luckily, most of these fees are easy to avoid. As long as you maintain the minimum balance requirement and don’t overdraw your account, you should avoid most banking fees.
Bank fees are one factor to consider when comparing bank accounts. Before making a decision, it’s also good to assess each bank’s features, mobile app, online reviews, and other details.
