Bank Fees and Overdrafts, and How to Dodge Them

A frustrating truth: banks make a lot of money from fees, and those fees hit hardest exactly when you can least afford them, when your balance is already low. A few dollars here, twenty-something dollars there, and a tight account gets quietly drained by charges that have nothing to do with your spending. The fix isn't to avoid banks. It's to know the traps and sidestep them.

Most account fees fall into a handful of types. Once you can name them, you can dodge them:

• Monthly maintenance fees. A charge just to have the account. Plenty of banks waive this; many never charge it at all.
• Minimum-balance fees. A penalty for letting your balance dip below some line. Brutal when money's tight, and completely avoidable with the right account.
• ATM fees. Charges for using an out-of-network ATM, sometimes from both the ATM and your bank. They add up fast on small withdrawals.
• Overdraft fees. The big one. If you spend more than you have, the bank may cover it and charge you a hefty fee, often more than the thing you bought even cost.

Most of these fees are optional once you set things up right. A few concrete moves handle almost all of them:

• Pick a free checking account. Many online banks and credit unions charge no monthly fee and require no minimum balance. You don't have to accept fees as the price of having a bank.
• *Opt out of overdraft coverage. When you opt out, a purchase you can't afford simply gets declined* instead of going through and triggering a fee. A declined card is a tiny, free embarrassment; an overdraft fee is real money gone.
• Watch your balance. Turn on low-balance alerts and check the app before a big purchase. Knowing your number is the cheapest protection there is.
• Use in-network ATMs. Stick to your bank's machines, or choose a bank that reimburses ATM fees, and the charges disappear.

Opting out of overdraft 'coverage' is one of the highest-value money moves you can make on a tight budget. You're trading a possible decline at the register for never getting hit by a surprise overdraft fee again.

Maybe a bank closed an account on you years ago, or you've never had one at all. Neither locks you out. Second-chance checking accounts are built for exactly this, and Getting Into the Banking System Safely walks through them, along with opening an account with an ITIN instead of a Social Security number.

Your bank should be a place that holds your money, not a place that nibbles at it. Choose a no-fee account, switch off overdraft, keep an eye on your balance, and the fees that drain so many tight accounts simply stop happening to yours.