Banking Basics: bank fees

When it comes to banking, sometimes it feels like everything comes at a price. Basic services like opening a bank account should cost next to nothing, but there are many different reasons for paying fees to your bank, whether it’s a monthly maintenance fee or a one-off charge for an international transfer.

Some might argue that the bank is offering you a service, after all. But what’s annoying is when you’re caught out by surprise and find yourself paying a fee that you didn’t even know existed. Nobody likes hidden charges.

This guide helps you know what to look out for, and manage your account without paying more than you expect.

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So, what counts as a fee? Bank fees can be anything from an ATM withdrawal charge, to interest on an overdraft. As for which fees you have to pay, this varies a lot from bank to bank – and from account to account.

For instance, banks in Italy and Spain, for example, often have more fees than banks in other European countries. And in the UK, ATM withdrawal fees are relatively rare, while in Germany, it’s common to have to pay if you use an ATM owned by a bank that’s not your own.

The only place that can tell you exactly what you’ll have to pay is your bank itself. But they don’t always make it easy – you might need to re-read the fine print to find out all the potential charges.

Let’s take a look at some of the principal bank fees you might expect to pay:

Some bank accounts charge a monthly fee for maintaining your account and offering its services – or to keep it open, in other words. This tends to be an affordable amount, in the region of €5-10 per month. There are many bank accounts out there with no monthly maintenance fee, so if you don’t want to pay for this, you have other options to explore.

Among banks who do charge a maintenance fee, sometimes they offer additional services as part of this price, such as free ATM withdrawals or better interest rates. So depending on how many withdrawals you make, and so on, a monthly maintenance fee isn’t always money down the drain – it can even be good value!

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If you try to spend more money than you have in your account, there are two possibilities: the first is that the transaction will be rejected because you have insufficient funds. The second, is that the bank will cover the cost, but put your balance into negative credit, and as a result you’ll go into ‘unarranged overdraft’. If you have an arranged overdraft with your bank, this isn’t so much of an issue – but in an unarranged overdraft, you’ll be charged a substantially higher penalty fee.

For arranged overdrafts, fees are often calculated as a percentage– for example, 9% interest on the amount that you’re overdrawn each day. There may also be a flat fee to pay for going into negative credit, which can be charged at a daily or monthly rate.

There could also be a fee to pay if a transfer bounces or if you don’t have enough funds to pay a direct debit. This is known as an ‘insufficient funds fee’ or an ‘unpaid transaction fee’.

All in all, try not to spend more money than you have. Whether or not you have an overdraft, it can get expensive.

A wire transfer is the term for an electronic transfer between two bank accounts. It’s possible– but not very common– for European banks to charge a fee for domestic wire transfers. Within the EU, the law states that transfers in euros must be charged at the same rate whether the transfer is domestic or to other countries in this area. However, international transfers outside of the EU are likely to cost the sender a bank fee.

Some banks charge a flat fee for international wire transfers. Others don’t, but watch out: if your bank states that there’s no international transfer fee, you should check what exchange rate they’ll use. It’s possible that instead of a fixed fee, they make money by converting your money at an unfavorable exchange rate.

To get around this problem, you could consider using a third-party service outside of your bank that specializes in foreign transfers.

Everyone needs to take cash out from time to time, so it’s important to know how much it costs. As we mentioned in a previous Banking Basics blog post, ATM fees are different around the world, and in some countries, there aren’t any.

The bank itself is also a factor: some charge ATM fees every time you make a withdrawal, and some will give you a certain amount of free withdrawals per month. Or they may only charge you if you take out money from another bank’s ATM.

Chargeback is when you get a refund for a transaction because of a serious problem; for instance, if your card was used fraudulently, or you were charged for something you never bought, or a retailer refuses to resolve a legitimate problem directly. The helpful thing about chargeback is that you apply for the refund via your bank, which will then talk to the card issuer (such as Visa or Mastercard) and you don’t have to deal with the original retailer.

Beware the rules around chargeback fees, because if you apply for a chargeback and the claim is unsuccessful, some bank will ask you to pay a fee to cover the administrative costs they incurred. This is less likely to happen on a successful claim.

Although it’s not an everyday fee, it’s worth remembering all the same. Some banks can charge you a fee if you want to close your account, for administrative purposes. Be sure to check this before you open an account in the first place.

If you regularly use an account, encountering a bank fee is probably inevitable at some stage. The trick is to think about which fees you’re most likely to face, and pick a bank that lets you avoid that. So, if you regularly withdraw money, for example, look for an account with low (or zero) ATM withdrawal fees.

If you often send money abroad, find one that makes international wire transfers low-cost and easy, or a bank that incorporates a third-party service to do this for you.

Finally, if you think you might need it, apply for an overdraft to have a financial cushion on your balance – it might not be completely free, but it could make any future overdraft fees substantially lower if you arrange it in advance, and most banks will only charge fees for the overdraft when you use it.

We all know that prevention is the best practice, but of course, that isn’t always possible. So what do you do if you get landed with a fee you think you shouldn’t have to pay? Let’s look at one commonplace example of a refundable charge– the overdraft fee.

Having to pay a fee you think has been unfairly added is extremely annoying – particularly if you’re being punished with more fees for having run out of money. Understandably, you might want to ask your bank to reconsider an overdraft fee it gave you.

If you feel there’s a legitimate reason for refunding the fee, or if that fee is preventing you from paying off a large debt, you can phone or write to your bank, or visit your local branch and request to have this fee waived. For written requests, there are templates to help you do this online.

Be sure to be formal and polite in your correspondence, and try to be as precise as possible by including details of the fee and a customer reference number, if you have one… but for security reasons, never give out sensitive information such as passwords and PINs, even if requested! (No legitimate bank will ever ask for this.)

Finally, be aware that your bank is not necessarily legally obliged to refund you, unless there’s been an error on their part, and ultimately the decision is at their discretion.

We aim to be transparent and fair about the fees we charge. When it comes to card payments, we never charge our customers fees on transactions made online or in-stores, anywhere in the world. We don’t charge a markup on foreign currency payments and you’ll always get the benefit of Mastercard’s best currency exchange rate. Best of all, our standard N26 bank account is free to open, with no account maintenance fee.