Understanding Bank Fees: What They Are and How to Avoid Them

Bank fees can feel like a mystery, just appearing on your statement leaving you wondering. It might be a monthly fee, an overdraft fee, or an ATM fee. Understanding why these fees exist and how you can avoid them is key.

I’ve broken down some of the most common bank fees to see how you can manage your money more effectively.

Common bank fees: Monthly maintenance fees

One of the most common fees you might have is the monthly maintenance fee. This fee is charged simply for having an account with the bank, and it’s usually applied to general or savings accounts. Banks charge this fee as a way of offsetting the costs of maintaining your account.

You may get specific benefits for paying the monthly fee such as additional functionality, insurance policies, or extra perks. So these maintenance fees may actually work out beneficial for you. I pay £7 a month for Monzo plus, and for me it’s worth it. Every week I can get a free greggs, every month a free cinema ticket, and every year a free railcard. And that’s alongside the extra functionality and discounts/ deals.

How to avoid it

Simply look for accounts that don’t charge monthly maintenance fees. Or if there is a fee it might be waivered if you maintain a minimum balance/ deposit above a certain amount each month.

Common bank fees: Overdraft fees

Overdraft fees are charged when you spend more money than you have in your account. For example, if you make a purchase or withdrawal and there are insufficient funds, your bank may approve the transaction but charge an overdraft fee.

Even if you have an agreed upon overdraft limit, you may be charged a fee, especially if you’re overdrawn for a longer period of time.

How to avoid it

Simply budget and then monitor your account balance regularly to avoid overspending. It’s also worth setting up alerts to notify you when your balance is low so you can avoid going into your overdraft.

Or you can set up an account with a free overdraft limit (but make sure you know the conditions), or even better go for one that doesn’t allow overdrafts, this way it’s not an option.

Common bank fees: ATM fees

ATM fees occur when you withdraw money from an ATM that is outside of your bank’s network. Both your bank and the ATM provider may charge you a fee for the transaction.

In the UK there’s usually a lot of free ATMs around banks and other areas, but some will charge you. This is also likely to happen when you’re abroad.

How to avoid it

If you know you’ll need cash try and plan in advance so you aren’t caught up. If this isn’t possible try and look for an ATM attached to a bank, supermarket or other large establishment that’s likely to be in the bank’s network to avoid the fee.

Common bank fees: Wire transfer fees

Wire transfers allow you to send money quickly from one bank account to another, often across long distances. While convenient, many banks charge for both sending and receiving wire transfers internationally.

How to avoid it

Check if your bank offers fee waivers for wire transfers or if your transfers can be processed through other, cheaper methods. If your bank doesn’t consider alternatives like PayPal or TransferWise which often have lower fees than banks themselves.

Common bank fees:Foreign transaction fees

When you use your bank card abroad or make an international purchase, you might face foreign transaction fees. These fees are typically a percentage of the purchase amount. This charge is to cover the cost of converting currency and processing international transactions.

How to avoid it

Where ever possible try and pay in local currency rather than in GBP, this way you may avoid or lower some of the fees charged. But even better than this look for a bank or account that doesn’t charge foreign transaction fees. There are plenty out there and it can save a lot of money, especially if you travel a lot. I use Monzo when travelling as there are no additional fees, and I can see the currency conversion used in my app.

Be proactive in avoiding bank fees

Bank fees can quickly add up and take a toll on your finances. But by finding the right account for what you need you can avoid these fees where ever possible.

With a bit of attention and planning, you can avoid unnecessary fees and save yourself money.

Are there any other bank fees you’ve encountered?