Top 10 Ways to Avoid Bank Fees

In my ten years in banking, I've had more clients complain about bank fees than I care to remember. However, bank fees are easily avoidable if you take a little time to plan ahead. Here are the top ten ways to avoid bank fees on your personal checking account.

Avoiding bank fees starts before you even open your account. Choose your bank carefully. Location is important, but also see what different types of accounts they offer (for example, if they have accounts with no minimum balance required or if they offer free accounts based on your employer) and how many employees are in the office you plan to use (a smaller, slower paced office usually means better service and therefore ultimately less fees). Also consider a credit union - a member owned financial institution that usually has lower fees than a bank.

Meet the employees at your local branch. I can't overstress the importance of meeting the employees of the bank branch that you plan to do business with, especially the manager. Go to the bank to open your account in person, and after your account is open, stop by the branch every month or so, even if you don't have a problem. Retail banking staff has high turnover, so this will allow you to keep up with the employees. The fact that they know you will come in very handy when you need a problem solved - which usually means getting fees waived!

Understand the limits of your account type. With today's fierce competition in retail banking, there is usually no reason to open an account with a minimum balance or other restrictions, but if you choose to do so, make sure you understand them thoroughly. These may include no teller visits or writing only a certain number of checks a month, etc. Going below the minimum balance or breaking whatever restrictions are in place will result in hefty fees.

Understand funds availability. Financial institutions are permitted to place holds on deposited items, and this is especially common on new accounts. If you try to withdraw funds that are on hold by check or debit card, you will incur an Unavailable Funds (UAF) Fee even though the funds are actually in your account. Make sure you understand when funds will be held and for how long.

Never trust the bank's balance. This goes hand in hand with balancing your checkbook. The balance given to you by an ATM or a bank employee does not include outstanding transactions (transactions that haven't cleared the bank). Even if you use a debit card exclusively, transactions can still take a few days to clear. Balance your account regularly so you know how much money is really in your account. If you exceed your balance, you will be hit with an Insufficient Funds (NSF) Fee. Also be aware that the bank will still allow you to use your debit card even if you are out of money. Don't use it unless you know you have the funds to cover the transaction.

Arrange for overdraft protection. Attach a savings account or credit card to your account so that if you do overdraft, funds will be pulled from the reserve to cover the transaction. There is a fee for this as well, but it is usually about one-third of the cost of an NSF fee.

Know how to get cash without a fee. Banks generally will only allow you to use their own ATMs without a fee. Credit unions usually have a shared network of ATMs that you can use for free. In either case, find the list on the financial institution's website. If you aren't near a free ATM, go to your nearest grocery store or Wal-Mart, make a small purchase and get cash back. Most banks do not charge for POS transactions. (POS stands for Point of Sale - any transaction where you slide your card and enter your PIN to pay for goods or services. Most POS merchants offer cash back.) Also, if you're near the bank during business hours, you can stop by and cash a check. It's free (as long as your account type permits it; most do) and it fulfills point # 2.

Verify that your direct deposit has been credited to your account as expected. Even the most reliable employers have problems occasionally, and nothing piles up the NSF fees more quickly than your paycheck not arriving.

Do not use your debit card to reserve a hotel or rent a car. These types of transactions cause a hold to be placed on your account as a form of security deposit. It can exceed your actual transaction amount by as much as a few hundred dollars. It may not be noticeable on a credit card, but on a debit card it will tie up your cash for days, potentially causing UAF Fees. Note that some, but not all, gas stations do this as well.

It's the 21^st century - use the technology! Anything that involves paper increases the risk that the bank will charge a fee for it. Do not ask to get your original checks back - since the implementation of Check 21, it's pointless anyway - and sign up for electronic statements and online banking. You may qualify for free online bill pay as well, in which case use that, too - it will save the cost of stamps. These tips should have you well on your way to a happy and fee-free banking relationship!