10 Common Banking Fees: What They Are and How to Avoid Them

Accounts are a safe place to safeguard and grow your money and that’s why it’s important to know what account-type best suits your financial goals including the attached bank fees, if any.

Let’s take a look at the what and why about bank fees: 

Bank fees are charges for various services provided by a bank and charged to a bank account holder. 

So, why do banks charge bank fees at all (isn’t the money deposited enough)?

In short, banks are a business too and the bank fees are one of the main sources of income for a bank.

The money in an account is the sole property of the account holder(s) unless declared otherwise according to legal reasons (e.g.) if a “freeze account order” is issued by the courts due to fraud, ownership dispute, payment default, when the bank is under investigation etc.     

Here’s a rundown of ten common bank fees charged and tips for cost effective options, to help you select the right account type, bank services to avoid / significantly reduce fee amount charges.

1. ATM / In-Network ATM Withdrawal Fee

ATM machines are a ‘‘lifesaver’’ when you need to access your money at any time from any location, especially when travelling.

This fee is a surcharge of using an ATM for withdrawal on every withdrawal (e.g.) if an ATM withdrawal fee / surcharge is Ksh.30 and you make withdrawals three times, you’re charged Ksh. 30 each time you make a withdrawal.  

• Keep in mind that whether you have enough money to cover your withdrawal amount plus the charge fee (or) not - the one hitch is, there isn’t any way around avoiding this fee 
  

The good news is that as banking technology advances the need for ATMs reduces significantly making it an expensive option for banks to sustain. Consequently, banks will eventually switch to digital banking upgrades and associated ATM fees are phased out’ along with it.

However, until then, take advantage of the fact that ATM use is optional and use your ATM card wisely. 

TIP:  You are charged less and a fixed fee for any amount limit withdrawal, when you withdraw from bank-owned ATMs.  

To avoid the fees completely, use your ATM card to pay via PDQ (at no charge), where applicable and use your ATM card as needed.

2. Lost Card / Replacement Fee

An ATM / Debit card and Credit card is like an important key to access various services and products and just like keys, they can be lost and misplaced easily. 

Maybe in the hope of fostering a sense of caution among customers, most banks charge to replace a damaged / lost card – so being mindful about your card is the best option.  

TIP: This is a non-avoidable charge due to the expiry date issued for bankcards (whether you lose it, damage it or not). The fee is often standard and deductible from your account and nowadays, you get your new card in minutes that makes this fee a bit more reasonable.

3. Out-Of-Network ATM Fee

You’re probably aware of this fee especially, if you travel a lot. 

Often when you travel or work at places where your bank may not have a bank-owned ATM machine, any ATM or credit card that has a Visa, MasterCard, American Express Logo can withdraw cash from ATMs that are part of these networks 

The key difference from regular / in-network ATM fees is that out-of-network ATM fees are notably higher than a regular / in-network ATM fee and that’s charged when you use ATMs that don’t belong to your bank.

TIP: Before opening a bank account, select a bank that has a large regional ATM network, even better; consider a bank with a large regional and international ATM network.

If you’re an account holder at a bank or if switching banks is not an ideal option, contact your bank for updates on their policy regarding out-of-network ATM fees (some may waive this charge for specific or all account-types)    

4. Maintenance / Monthly Service Fee

This is one of the more popular fees charged for opening a bank account that charges a maintenance / monthly service fee that varies, as per account type requirement. 

• Noteworthy about account’s with a maintenance fee charge is they don’t have any earning potential to grow your money, as no interest is earned for such accounts, 

TIP:  Be diligent about the account types available – most do not have a minimum or maintenance fee as part of the requirements, however, these are not always the cheapest option especially for regular transactions. 

If the account type best suited for you, charges a maintenance fee, be disciplined about the minimum balance requirement and sign-up for e-statements over mail (Yes…paper isn’t free and it gets pricey. Go for the paperless) 

5. Overdraft Fee

If you spend more than you have in your account, the negative balance incurred attracts an overdraft fee – and that’s what makes this fee one of the most common yet one of the more expensive fees, especially if you often overspend.

TIP:  In pt.3 we’ve noted the importance of meeting the ‘‘minimum balance’’ requirement - for that reason, the most obvious way to avoid overdraft fees is not to spend more than you have in your account (aka maintain a positive balance). 

Here is how you can make and stick to a budget to avoid overspending like a pro

Remember, be diligent about the account types available – most do not have a minimum or maintenance fee as part of the requirements. If the account type best suited for you, charges a maintenance fee, be disciplined about the minimum balance requirement and sign-up for e-statements over mail. 

6. Non-Sufficient / Insufficient Fee / NSF Fee

Unlike an overdraft fee that’s charged because the bank allows you to access funds you don’t have; an NSF fee is charged because you don’t have enough without the access to funds you don’t have. 

Its popularly charged when an issued cheque bounces, due to insufficient funds in your account. 

TIP:  The most obvious way to avoid NSF fees is to not issue ‘‘bad or bounced cheques’’. One key way to do this; maintain a positive account balance and don’t spend more than you have in your account. 

7. Paper Statement Fees

Digital bank statements are free; even better, you can access real-time information about your account(s).

If you receive paper statements, you’re charged for this service - the printing and mailing is an expense you will pay for this option. 

‘‘Imagine mailing over 200 statements and imagine the amount of paperwork to file you’d have to do over the years?’’

Its easy to see how this is a win-win solution for you and the ban. Opt for digital / e-solutions and if you are not sure if you’ve signed-up for paper bank statements, contact your bank, make the switch and get e-setup in minutes.

TIP: Remember - paper is not free and the paperless option is the pocket-friendly, eco-friendly option 

8. Over-The-Counter (OTC) Fee

Originally introduced as a way to encourage customers to move onto digital banking services and decongest bank halls, this is a fee primarily charged for withdrawals. It ranges between Ksh50 - Ksh.400, depending on the bank.  

TIP: This fee often increases at the bank’s discretion, so best to maximise your access points as an account holder. 

(e.g.) Download your bank APP for no-fee transactions, use mobile banking services and your ATM card for free-to-low charges 24/7 

9. Wire Transfer / SWIFT Transfer Fee

This fee is charged when transferring money into and out of an account that ranges from a flat rate to a range rate (e.g.) Ksh40,000 - 75,000 fee-charge of Ksh.Y, Ksh.500,000 - 800,000 fee-charge of Ksh.Z

Its key advantage as a safer, bulk-free, instant money transfer for large amounts; within the same bank and to other banks within a country and abroad, makes this a favourable bank service to use.

TIP:  Do your research and enjoy this reliable service option while reaping the benefits of saving a lot more, by limiting this bank service to specific amounts and not regular small amount transfers, especially for bank transfers to other banks.

Alternatively, look into other options for large amount transfers that offer better rates (or) lower rates 

10. Account Closure Fee

Not every bank charges a fee for closing an account, which is what an account closure fee is. 

An account closure fee is charged according to an account’s terms and conditions. For instance, an early-account-closure fee is charged if you close an account before a specified time lapses, which is usually before 90 – 180 days.

TIP:  This cannot be overemphasised; pay attention to account T&Cs. Review the T&Cs to get information about account closure (if possible, be patient and hold-off until the penalty timeline passes, so as not to incur this fee) – it's usually a one or two month wait to avoid the fee.

• One precaution to keep in mind – don’t open an account for a one-time transaction, like a bonus or refund payment where the person paying, may insist on forwarding payments to a bank that's not yours for their convenience.   

In situations where it makes sense to close an account early (e.g.) if you’re relocating abroad or get a better account type option, this fee is unavoidable yet understandable.

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One of the best ways to safeguard your financial goals is by avoiding unnecessary fees and this checklist of popular fees will help you save money and time. 

• The good news is that these are not hidden charges and now that you know what to lookout for with each transaction type, it is easier to get ahead of no-to-little bank fee charges by doing your research before opening an account and frequently reviewing your account(s) T&Cs