Abank account might be a safe place to save, invest or manage your finances. But remember banks are in business, too. And one of the ways banks make money is through charging fees for most, if not all, services. Banks will not stop charging fees anytime soon, but that does not mean you have to lose money through some of these fees. Below are some of the common pricey bank fees and how you can avoid them;
Account Maintenance Fees
Most banks will charge a monthly maintenance fee to keep your account operating. The fees vary between banks. However, banks have different bank account product, where some of their accounts will not have a monthly maintenance fee.
How to avoid account maintenance fees: opt for a bank account or banking institution that does not charge monthly maintenance fees. Other banks with monthly maintenance fees will offer incentives like having a high operating balance, using a debit card for payments or regular automatic deposits, among others for low or no account maintenance fee.
Minimum Operating Balance Fees
It’s the minimum amount that your bank account needs to have at any given time. Again, not all bank accounts charge this, although most banking institutions will have accounts that charge this fee. With such an account, the bank will charge you a certain amount for having a lower balance. Say, for example, the account has a minimum operating balance of Ksh 2,000 ($20). The bank will always charge you a fee when you account balance is below this amount, like Ksh 1,8000 ($18).
How to avoid minimum operating balance fees: avoid opening an account with a minimum operating balance, especially if you cannot meet this requirement. Many banks in Kenya offer accounts with no minimum operating balance, however, if it’s not possible to find one with no minimum operating balance, for an account with a minimum operating balance you can afford.
It applies when you use more than what’s in your account. For example, when you pay for transactions worth Ksh 10,000 ($100) but your account balance is Ksh 9,000 ($90). The bank will charge you for having insufficient fees in your account process the payment. The overdraft fee could be per transaction or overall transactions depending on the bank.
How to avoid overdraft fees: do not opt for the overdraft protection fees. Without it, the bank will decline your transaction instead of processing it and recovering the funds later with an added cost. Second, always keep track of your bank account balances, especially when using physical cheques. Cheque books always have a section for updating details of the cheque amount, the payee, payment date and the account balances before and after the cashing of the cheque. Third, you can set low balance notifications or alerts on your mobile banking or phone notifications. The bank will always send you an automated notification when your account balance is about to hit zero, or the set amount.
Hard Copy Statement Charges
Most banks will charge you per statement to print hard copies of your statement. Some banks may even charge you based on whether the account is operating or closed, or the period you need to be printed. Some of these charges can be as high as Ksh. 1.000 or above.
How to avoid hard copy statement charges: you can request for e-statements and save them in your drive for future reference. Your bank does not have to send you hard copies of your statement every month unless you are required to provide certified bank account statements like when applying for a visa.
ATMs can be a saving grace when you need some quick cash without having to queue at the bank. While every ATM transaction has a fee, it’s more expensive when you use an ATM that’s not in your bank’s network. We might be in a digital world where online and mobile banking saves us from queuing in a banking hall, but there are a few businesses that only transact in cash. Some local banks will charge you about Ksh. 30.00 ($0.3) when using their ATMs but charge over Ksh. 250 ($2.5) for other banks cards.
How to avoid ATM fees charges: it’s good to always have some cash with you in case you have to pay for products or services where mobile money or running your credit or debit card is not possible. If withdrawing money is the only option, look for an ATM under your bank’s network or any affiliated networks. Some banks in Kenya have local agents offering some banking services, including cash withdrawals. If you cannot spot your bank’s ATM close to you, you can opt for an agent.
Bounced Cheque Fees
You will definitely receive a penalty for writing a bouncing cheque. Unfortunately, some banks will also charge you for cashing a bounced cheque. It doesn’t matter whether the cheque bounced due to insufficient funds, and other errors like signatures and amounts.
How to avoid bounced cheque fees: ensure your account is fully funded before issuing a cheque. If a client is yet to cash a cheque unless it’s post-dated. You can call the payee to confirm why they are yet to cash the cheque. It’s also advisable to always leave money in the account to cover for this when they cash the cheque. It’s also ideal to always receive cheque payments from clients or people you know well in case cash, wire and mobile transfers are not possible. Alternatively, you can issue or receive a cashier’s order/cheque, which is a payment guaranteed by the bank. It might not be free but the cost will probably be lower than that of a bounced cheque.
Wire Transfer Fees
Wire transfers might be the safest alternative to cheques, but they can get quite pricey. Wire transfers refer to electronic transfer of money between bank accounts. Transactions like RTGS’s (Real Time Gross Transfers) can cost as high as Ksh. 500 ($5) or more. Swift transfers can go as high as Ksh. 2,000 ($5) with some banks.
How to avoid wire transfer fees: you can use money transfer apps like PayPal for most international transfers or Pesapal. Alternative transfers to RTGS transfers is EFT (Electronic Fund Transfers). The difference between the two is that RTGS transfers happen in “real-time”, where the recipient’s account receives the funds immediately after the sender pays. EFTs, on the other hand, will take time for the money to reflect in the recipient’s account, about 1 to 3 days in Kenya. EFTs may take longer to reflect, but the charges are lower compared to RTGS transfers.
The bottom line is to always keep an eye on all banking fees your bank charges you. If you are not sure, try going through your bank statement for the last 6 months or so. Some of the fees are unavoidable, but they are manageable, like ATM fees and bounced cheque charges. If a bank is charging you an arm and a leg for most of the services, shop around among its competitors and settle for one with good services and affordable banking fees. And ensure you ask all the necessary and right questions regarding fees while you are it.
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