Is truly no-fee banking possible?

Man standing on a bus, smiling and reading on his smartphone about no-fee bankingImage: Man standing on a bus, smiling and reading on his smartphone about no-fee banking

In a Nutshell

Never paying a fee to do business with a bank may seem ideal. But complete no-fee banking probably isn’t in the cards for most people. Still, some banks and credit unions will waive some fees on certain types of checking or savings accounts, provided you meet certain requirements. These might include maintaining a minimum balance or making a monthly direct deposit.
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You’re more likely to find a bank that will waive fees for certain account types than to find a bank that offers true no-fee banking.

You hear your local bank is offering free checking and you’re interested in opening an account. According to the Consumer Financial Protection Bureau, that means it can’t charge any monthly service fees; fees for exceeding a certain number of transactions; fees for not meeting a minimum monthly balance; or fees to deposit, withdraw or transfer money.

But you may be surprised to learn that a free checking account may still charge you for using a debit card at an ATM or for overdrafting your account. Accounts advertised as free and no-fee banking are not always what they seem, so it’s good to read the fine print and do some research beforehand.

Bank fee basics

Some financial institutions advertise free and no-fee accounts. But you may be more likely to find a bank or credit union that will waive certain fees for some types of accounts than you are to find a bank account that is truly fee-free.

Keep in mind that banks and credit unions can charge customers fees to use certain savings and checking account services. While offers vary among financial institutions, common checking account fees you may encounter include …

  • Monthly service fees. This may be waived if you make direct deposits.
  • Overdraft fees if you bounce a check.
  • ATM-use fee each time you use an ATM other than your own.
  • Transaction fees for check use.
  • Fees for access to online or mobile banking or bill pay.
  • Fees for failing to maintain a minimum balance.

When fees add up, banking can get expensive. No-fee or free banking —  which doesn’t charge fees for various aspects of your accounts — may sound like a simple solution. But there’s often a catch for any type of “no-fee” banking account. When exploring your options, be sure to learn which fees are eliminated completely and which may apply under certain circumstances. Ask for a fee schedule for easy reference.

What are some qualifications for no-fee banking?

You may have to meet a number of qualifications to avoid certain bank account fees.

  • Minimum opening deposit
  • Minimum account balance
  • Required monthly direct deposit

Here’s a sample scenario: You open a fee-free savings account at a credit union. But in order to avoid monthly maintenance charges, the financial institution requires you to maintain a $500 minimum balance. When you read the account agreement details, you learn that once your balance goes below that required minimum amount, you’re charged a monthly maintenance fee of $20.

Learn more about getting a free checking account

This is why it’s always a good idea to read the fine print with any type of financial account. Financial institutions can have varying rules for different accounts. If you don’t meet qualifications to avoid certain fees, you may be facing monthly fees. On the flip side, if you understand the requirements and follow them, you may be rewarded with no-fee banking that has the potential to save you plenty of money.

Where might I find no-fee banking?

There are many places to find free and no-fee banking options. A good first step is to ask your current bank or credit union, which may offer accounts that waive certain fees.

An internet search can yield a variety of no-fee banking options as well. Some of these options are from online banks, which means there are likely no physical branches and that you can manage your online banking account digitally — often on a mobile device.

Of course, you can always ask friends and relatives for banking services recommendations. A recommendation from someone you trust about no-fee banking can help narrow your search for your next savings or checking account.

Bottom line

Having an account with the opportunity to avoid fees is a good thing, but it’s important to be cautious. Always read the fine print of the account details so you understand which fees can be waived and under which circumstances. And be sure to follow the rules so you can continue to enjoy free or no-fee banking. After some thorough research, you should be on your way to choosing a bank.

About the author: Laura Malm is a writer and editor with a bachelor’s degree in journalism and strategic communication from the University of Minnesota. She is passionate about financial literacy and helping others feel confident in th… Read more.