What is your bank to you?
For the most part, a bank is just a safe place to store money, make investments, and receive loans. But the banking industry is notoriously complex, and perhaps infamously greedy. For most people, that greed is revealed in the form of sneaky, pesky bank charges.
In this article, we aren’t going to delve into the economics or business of banking. They have their revenues, expenses, and excuses for levying bank charges for the services they provide. What we will do is:
Banks make a profit in many ways. But every bank is very compartmentalized in its operations. For example, banks make ______ of their profits from interest on loans. They also charge fees for services rendered throughout the lending process.
When it comes to everyday banking, banks offer you basic banking services. Those services do incur operational expenses, which banks must cover somehow.
When you just open a checking account, for example, there is no way for a bank to profit from it despite the storage, access to banking infrastructure, and so on that their services provide.
At this point, it’s clearly reasonable that banks charge you something for the services they provide. If they didn’t, you would have to store your money in a safe and open the safe every time you needed money.
You would also have a harder time getting a mortgage (or any kind of financing for a home) and so on. But what constitutes a fair and reasonable fee structure?
I’m sure we would all agree that hidden bank charges do nothing good for the PR of the banks. Regardless, many banks do charge very sneaky fees that you could make a case for banning.
The reason banks choose to be very sneaky about some fees is perhaps simply because they can. While banks are heavily regulated institutions, they are still private companies that can bring in revenues through a wide range of sneaky, albeit legal, methods.
They have to cover their operating expenses, but they simply often choose to do so in a sneaky way. If you pay $5 for a hidden fee, you:
Here are some of the most common and expensive hidden fees in personal banking. First, let’s start with the less hidden ones.
Account maintenance fees are the most basic and arguably reasonable of the bank charges. For holding onto your money and enabling its digital use, among many other things that go on behind the scenes, you pay a simple monthly fee.
The main issue with maintenance fees, which are ubiquitous, is the question of where exactly they go. Nominally, they are for the human and material costs incurred while managing accounts.
When it comes to this infamous fee, you could make a strong argument that it shouldn’t exist. Or, you would expect that it should be a very cheap fee at most. However, bank overdraft fees are known to be very expensive.
In banking, overdraft fees are regarded as payment incidents that require a response. The typical response is to write up an “intervention commission”. This happens when you either:
In Europe, these bank charges are better-regulated. The maximum fee in France is 8 Euros per incident, but only up to 80 Euros per year. In the US, however, a single bank overdraft has been known to cost as much as $38.50 per incident with up to 5 incidents possible in a single day (M&T Bank)!
Even Bank of America charges as much as $35 per overdraft, up to 4 times per day.
Now, let’s move on to the fees you’ve likely never been told about.
Many people don’t know they’re paying this fee. If you get things as simple as online balance reports that you read on your mobile, you may be paying them.
Even though it’s 2022, some banks still charge a fee for allowing you to access your bank account online. This can sometimes be made worse by the fact that you’re paying for an ugly, clunky report that you can’t even make sense of.
What can be worse than overdraft fees?
Some banks will actually charge more than just an intervention commission/overdraft fee. When you pay by check, if your check doesn’t go through, you get a payment rejection fee as well.
Likewise, you may face a similar fee for attempting a wire transfer that can’t go through. These fees normally cost less than overdraft fees, but they still don’t come cheap.
Sometimes, you may fail to enter your PIN correctly and the ATM will seize your card. This may happen after a specified number of failures. However, you will then be stuck with 2 pricy new fees:
Some banks will charge a fee for you to change withdrawal, payment, or credit limits on their cards. This is normally a much smaller fee, but it’s still often unexpected and is always annoying.
Want more control over your money? Read this next: Personal Finance for Everyone: A Step-by-Step Guide to Budgeting and Money Management
For the most part, there are a few approaches you can take to avoid fees:
It’s often possible to negotiate with your bank on certain fees. This is especially true of:
When negotiating with your bank, just remember to:
If you’re not sure whether you’ve been struck a hidden blow by your bank, have a look at your statements. People are often surprised by what they find.
All banks are obligated to provide annual, exhaustive lists of all fees charged to each customer. This document will certainly contain any fees you have been secretly charged. Any willful omission would amount to fraud, after all.
Not all banks are equal. Sometimes, it just so happens that you’re working with an unreasonable, greedy bank with a poor corporate culture. In such cases, the only thing you can do for your financial and mental well-being is go to a better bank.
Simply find another bank that is renowned for customer service and does not charge the worst of these hidden fees.
Banks charge fees, and those fees are often reasonable. However, many banks charge at least one very sneaky fee that is unfair and arguably somewhat unethical.
As consumers, all we can do is equip ourselves with the knowledge to understand bank fee structures and avoid being taken advantage of.
It makes sense to look at your statements and compare what you’re currently provided with what other banks offer.
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