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When you put money into a savings account, you most likely want to keep it safe and perhaps even help it grow a little.
After all, saving money can be hard, and the account that you pick to hold your nest egg should make it easier by charging you few or no fees and paying you a reasonable interest rate.
Unfortunately, there are plenty of savings accounts out there that do charge fees, including things like monthly maintenance fees, overdraft fees, and more. That's why it's important to understand how to avoid getting hit with unnecessary costs that reduce the money you're putting away for a rainy day or important purchases.
The good news is that by choosing the right savings account, you can avoid incurring these expenses so you don't make your bank richer while you get poorer. Here are a few key savings account fees you should be aware of, along with some tips on how to avoid paying them.
Key takeaways
- Some savings accounts charge you fees, which can make growing your money harder.
- These fees can include monthly maintenance fees and minimum balance requirements.
- You can usually avoid the fees if you're smart about where you bank and what you do with your money.
Common savings account fees
The only way to know which fees your bank charges is to review the account documents — ideally before you open a savings account.
However, there are some common savings account fees you should watch out for, including:
- Monthly maintenance or service fees: According to the FDIC, banks are allowed to charge a monthly fee in order to maintain your accounts. These are fees just for having the account open.
- Minimum balance fees: Some banks require you to keep a certain amount of money in your savings account to avoid a monthly charge.
- Overdraft fees: Overdraft fees are charged when you have too little money in your account to cover all of your transactions. The FDIC says overdraft fees could cost you around $35 per transaction.
- ATM fees: ATM fees are charged when you withdraw money from an ATM that is not part of your bank's network. Not all savings accounts offer ATM cards, but you must watch out for these fees if yours does.
- Returned item fees: If you deposit a check someone else gives you and that other person doesn't have the money to cover it, you can unfortunately be charged a return fee.
- Wire transfer fees: This fee is charged if you move money in or out of your account using a wire transfer, which electronically transfers money from one bank to another. Some banks charge as much as $50 for incoming and/or outgoing wires with fees usually higher for international transfers.
- Excessive transactions: Federal law used to limit you to six withdrawals a month from savings accounts under Regulation D. The law no longer requires this, but some banks choose to set limits anyway and charge you if you exceed them.
The best savings accounts should not charge most of these fees. Ultimately, finding a fee-free account is probably your best bet for avoiding them.
However, if you want to keep your money in an account that imposes some or all of these costs, you need to know the common ways banks allow you to opt out of paying them.
How to avoid these savings account fees
The good news is, it's often possible to avoid savings account fees entirely, even with banks that have these fees as the default. Here's how you can avoid each of these common charges.
Monthly maintenance or service fees
Most banks offer several ways to avoid monthly maintenance fees. Options may include:
- Setting up a direct deposit that moves money into your savings account each month
- Maintaining a certain minimum balance
- Making a certain minimum number of transactions on a monthly basis
- Having multiple accounts or using multiple products from the same bank
You need to make sure you know your bank's specific rules for avoiding these fees, though.
For example, your direct deposit may need to meet minimum size requirements, such as a $500 minimum monthly deposit. Or, if you must maintain a certain account balance, find out how your bank calculates this. If it is the average daily balance, the money needs to be in the account for most of the month, not just deposited on the last day.
Minimum balance fees
Minimum balance fees are charged if your account falls below a certain balance. You can avoid these fees by making sure that you have at least the required amount in your account. For example, if you must maintain a $500 minimum balance, keep at least that much money in the account.
You'll need to know how the bank calculates minimum balance. If it is the average daily balance, then your account has to have an average of $500 in it every day during the current cycle.
If you're trying to avoid this fee, the FDIC recommends that you set a low balance alert if your account offers one. That way, you'll get a text or email if your account drops below the minimum required amount so you can transfer money in.
Overdraft fees
Overdraft fees can be avoided by making sure you don't have more transactions than you have money in your account. For example, if you have $500 in your account, avoid using your debit card to spend more than $500.
You can also keep a cushion in your account, such as an extra $100, $200, or $500, just in case a payment unexpectedly clears and leaves you with less money than you thought.
Many banks also allow you to sign up for overdraft protection, which provides coverage if you spend too much out of your account. Typically, this requires you to link another account to savings, so your money can be automatically transferred over when there's a shortfall.
The FDIC also says you can opt out of overdrafts, but that will lead to your bank declining transactions if there are insufficient funds.
ATM fees
To avoid ATM fees, withdraw funds from your account only at partner ATMs. Your bank should have a list of partner ATMs that you can search online by geographic location. For example, here is Bank of America's online ATM locator.
You can also open a savings account with a bank that reimburses you for using an out-of-network ATM. This would allow you broader access to your money while making sure you aren't paying the fee. Ally Bank is an example of one of these banks as it reimburses you up to $10 per statement cycle if another bank charges you.
If you only use an out-of-network ATM a few times and the fee is reasonable, Ally's reimbursement policy, and similar ones from other banks, could help you avoid these fees entirely.
Returned item fees
It's hard to avoid returned item fees since you're relying on someone else to be responsible. Your best bet is to avoid accepting checks or money transfers from anyone you don't know well or don't trust completely to have the promised funds in their account.
If that's not the case and someone wants to give you money, ask for cash or Venmo to avoid these issues.
Wire transfer fees
Wire transfer fees sometimes can't be avoided. If you're closing on a home sale, for example, many title companies require you to wire the money to them.
However, you can limit the wires you send only to situations when you have no other options, while using other methods of transferring money in other cases. Some good examples of free or low-cost services to transfer funds quickly include Venmo, Zelle, and PayPal.
Excessive withdrawals
If you're being charged for too many withdrawals, you'll have to stop taking money out of your account so often. To solve this, you can open a checking account for funds that will come into your account and will leave soon after to pay for expenses. The money you put in savings should be money you can afford to leave alone for a while.
Savings accounts we recommend
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FAQs
Do you get penalized for withdrawing from a savings account?
The federal government used to impose penalties if you had more than six withdrawals from a savings account per cycle. This rule changed, but some lenders still charge you for excess transactions.
Do I have to pay taxes on a high-yield savings account?
Interest is taxable on high-yield savings accounts. Your bank should send you a 1099-INT to make sure your interest is reported properly and that you include it in your taxable income. Interest is taxed the same as your regular income, such as income from your job.
What's the most you should keep in a savings account?
The amount you should keep in a savings account varies depending on your goals. It's a good idea to have an emergency fund with three to six months of living expenses. You should also keep money you are likely to need within the next two to five years or so in savings, so you can earn reasonable returns while avoiding risk.
Money used for long-term goals, on the other hand, should be invested in the stock market.
Is it better to have two savings accounts or one?
Many people prefer to have multiple savings accounts and switch to different accounts used for different purchases.
For example, you could have one savings account for emergencies and another for a vacation fund. It's usually better to have multiple accounts as it is easier to see if you are on track for individual goals and you are less likely to spend the money on something other than what you are saving it for.
Bottom line
Savings account fees are rarely, if ever, worth paying. Look for an account that doesn't charge them, or explore ways to avoid them so you can keep more of the money you worked so hard to save. A good place to start your search for an account is our list of the best savings accounts with no monthly fees.
