How to Control Charges to Your Bank Account

A bank account is a safe, efficient, and convenient way to handle your money. But there are various types of charges associated with some accounts. When you understand the charges and what causes them, you can determine
how to avoid or control the charges and thereby save a considerable amount of money over time.

Evaluate Your Options Before Opening an Account

Banks generally offer different types of checking accounts, some of which are adapted to accommodate the needs of different groups of customers. So the first step in controlling bank charges is to evaluate your own situation. You should think about what you need from your checking account, investigate and compare the different types of checking accounts offered, and choose the option that is most advantageous for you. By selecting the right account, you can avoid some of the charges.

Many banks offer free checking accounts; that is, accounts with no maintenance fee and no minimum balance requirement. Some banks may offer free checking accounts for certain groups of customers, such as students or people 50 or 55 years of age or older. In some cases the bank may offer a checking account without charges as long as the customer has other products with the bank, such as a credit card, savings account, certificate of deposit, mortgage loan, or other type of loan.

You can look for information on the banks' websites, where they show a comparison of the different types of checking accounts, the requirements for opening them, and the charges associated with each type of account. You can also visit the bank and talk to an account executive to inquire about the possibilities available and ask for guidance.

Types of Charges

Some of the most common charges to a checking account are the monthly service charge, the charge for printing checks, charges based on the number of checks drawn, charges for use of an automatic teller machine (ATM), charges for overdrafts, charges for checks returned due to insufficient funds, and charges for placing stop-payment orders.

Monthly Service Charge or Maintenance Charge
This is a monthly fee the bank charges for having the account. In some types of accounts this charge depends on maintaining a minimum balance. As long as the balance in your account during the month stays above the
minimum amount, there is no fee.

In some cases the maintenance charge is based on the balance in your checking account or the total of the balance in your checking account plus the balances in other bank products, such as savings accounts, certificates of deposit, money market instruments, and individual retirement accounts (IRAs).

It is important to understand the conditions that apply in the case of a checking account with no maintenance charges. There could be a limit on the number of checks you can write each month, or you may have to maintain a minimum balance in the account, as mentioned above. Another requirement for a free or low-cost checking account could be that you must have direct deposit of your paycheck. In any case, direct deposit can be convenient once you have an account set up. It is an automatic and safe way to receive your pay, without having to go to the bank to deposit or cash a paycheck.

Based on the foregoing, there are generally two ways to avoid the monthly service or maintenance charge: choose a type of account that doesn't charge a monthly fee, or maintain a sufficient balance in your account so you are not charged the fee.

Charge for Printing Checks

When you open an account and ask for checks, the bank will charge your account a fee for printing the checks. Normally there is a minimum quantity of checks that you can request. The bank could offer different types of checks, for example with different designs, with or without a stub that remains in your checkbook for noting the check data, and checks with carbon copy. Checks with special designs or the other options generally cost more than standard checks.

You could avoid this charge if you are going to pay all your bills on line, withdraw the cash you need from the ATM, and really don't need to write checks. But you should consider your own circumstances and the convenience of having the option to write a check if you need to.

Charge for the Checks You Write

In addition to the monthly service or maintenance fee, or in some cases instead of this fee, the bank could charge your account for each check you write, or could charge you for each check over a certain number of checks per month.
You can avoid or minimize this charge by paying your bills on line instead of writing checks and sending them by mail. This assumes that the account you open allows you to manage your account online with a bill paying
facility.

Charge for Using an ATM

Normally the bank allows its customers to use the bank's own ATMs without a charge. But there could be a charge when you use other banks' ATMs. In that case, the other bank could also charge a fee for using their ATMs. Although these charges do not represent a significant amount for each transaction, they can add up over time when you use ATMs frequently, so it is important to control them.

The best way to avoid this charge is to use only your own bank's ATMs. This is not always possible when you are somewhere else and need to withdraw cash from an ATM that does not belong to your bank. ATMs exist in order to provide this convenience. But with a little planning, you can take out the cash you will need from your own bank's ATMs, or inside the bank itself, and thereby avoid this charge. If you are traveling, you should weigh the risk of carrying cash against the charge you incur when you take cash out of ATMs as you need it.

Charges for Insufficient Funds

When you write a check and there are not sufficient funds in your account to cover the check, the bank will not honor the check and will also charge you a fee. This fee can be quite high and is charged for each insufficient funds check you write.

The way to avoid this charge is to keep your account reconciled and up-to-date with all debits and credits, including deposits and other credits, all the checks you have written, and all the bank charges. When you manage your account online, you can see the accounting balance and the available balance at all times. If you manage your account using the register in your checkbook, it is important to note all entries. For example, you should note the date, payee, and amount of the check in your checkbook register as soon as you write the check itself, note your deposits as soon as you make them, and you should note the bank charges and any other credits when you receive your statement and reconcile your account balance. This way you can be confident that the amount recorded in your checkbook register is up-to-date so you will know the balance you have available and can avoid writing checks with insufficient funds.
Another possibility, for the times when you could potentially write a check without sufficient funds in your account, is to contract overdraft protection, which is in effect a line of credit with the bank that is
activated when you write a check for more than the balance in your account. Normally, interest is charged, and possibly a fee or commission for the overdraft protection, so it is important to understand the conditions before contracting it. But in any event, the costs involved with an overdraft line of credit could be lower than the charges for insufficient funds checks, and overdraft protection can protect you from the adverse consequences in your payment history and therefore in your credit for checks that are returned due to insufficient funds.

Charge for Rejected Deposits

When you deposit a check in your account and the check is rejected by the bank on which it was drawn, your bank could charge you a fee for the rejected deposit.

When you are receiving payment from someone you don't know, or when you have doubts about a check, it is preferable to ask for a bank draft or certified check, not only to avoid a charge for a rejected deposit, but also to ensure that you receive your payment.

Charge for Stop Payment Orders

When you write a check and send it, or hand it over to the payee, and subsequently find that you want to stop the payment, due to breach or non-fulfillment on the part of the payee of the conditions under which you issue the check, or when you lose a check and want to ensure that no one cashes it, you can place a stop order on the check. The bank generally charges a fee for this service.

By taking care of your checkbook, always keeping it in a safe place, and noting all the checks you write, you can avoid the need to request a stop payment order for a lost check. It may be more difficult to avoid the need to issue a stop payment order for breach or non-fulfillment on the part of the payee, but in this case it is better to incur the cost of issuing the stop payment order and not lose the amount of the check.

Charge for Telephone Inquiries

The bank may charge you when you call to inquire about your balance or to confirm that a deposit or check has been processed. You can avoid this charge by using the online banking option, where you can see your balance and the up-to-date activity in your account.

Checking Accounts that Pay Interest
There are checking accounts that pay interest on the balance maintained in the account. The interest you earn could offset some or all of the charges to your account, and could even generate additional income. It is
important to consider all the conditions as a whole in order to determine whether an account that pays interest is to your advantage, taking into account any special requirements this type of account may involve. For example, for a checking account that pays interest, it may be necessary to maintain a minimum balance in your account. If the charges for dropping below the minimum balance are higher than the interest you could earn, considering the average balance you can maintain in your account, this may not always be the best option.