Bank charges are the fees a bank takes from customers for running their accounts and providing services, as distinct from the interest it charges on loans or pays on deposits. They include account maintenance fees, charges for transfers and international payments, fees for an unarranged overdraft or a bounced payment, card and cash machine fees, and charges for items such as a chequebook, a banker's draft or a duplicate statement. Banks publish them in a tariff, often called a fee schedule or schedule of charges.
Charges are a major source of non-interest income for banks and a frequent source of complaints from customers. Because they can be hard to compare and can fall hardest on people with low balances, most countries regulate how they are disclosed, and some cap or ban particular fees. Fees charged by payment firms and card networks, such as interchange or a transaction fee, are related but separate subjects.
Bank charges in plain terms
Think of a gym membership. You pay a monthly fee to belong, and then extra for a personal trainer, a locker or a towel. If you break a rule, such as returning a towel late, there is a penalty. A bank account works much the same way: some accounts charge a monthly fee, specific services cost extra, and mistakes such as spending more than you have can trigger a penalty.
The key to keeping costs down is the same as at the gym: read the price list before you join, pick the plan that matches how you actually use it, and avoid the penalties.
Common types of bank charge
- Account fees. A monthly or yearly maintenance fee, a fee for falling below a minimum balance, or a dormancy fee on an unused account.
- Overdraft and returned-item fees. Charges or interest for spending beyond the balance, and fees when a payment is refused for non-sufficient funds (NSF).
- Payment fees. Charges for sending an international wire transfer, for receiving one, and for the foreign exchange margin built into the rate.
- Cash and card fees. Fees for using another bank's automated teller machine (ATM), for using a debit card abroad, or for dynamic currency conversion at a foreign terminal.
- Service fees. Charges for cheques, stop-payment orders, drafts, certificates, a safe deposit box, and paper or duplicate bank account statements.
Many banks waive some charges on accounts that keep a set balance or receive a regular salary, and some countries require a basic account with no or low fees for people on low incomes, as part of access to banking policies.
Disclosure and consumer protection
Regulators focus on making charges visible before a customer opens an account and on each statement afterwards.
- United States. The Truth in Savings Act, implemented by Regulation DD, requires deposit-taking institutions to disclose fees and terms on deposit accounts in a standard way. Under Regulation E, banks may not charge overdraft fees on ATM withdrawals and one-time debit card purchases unless the customer has opted in.
- European Union. The Payment Accounts Directive of 2014 requires a standard fee information document before an account is opened, a yearly statement of fees, at least one free comparison website per country, and a right to a basic payment account.
- United Kingdom. Personal current accounts are commonly free while in credit, and since April 2020 the Financial Conduct Authority (FCA) has required banks to price overdrafts with a simple annual interest rate, ending fixed daily and monthly overdraft fees.
Bank charges in Pakistan
The State Bank of Pakistan lets banks set their own service charges but requires each bank to fix them in advance for each half-year, January to June and July to December, in a printed schedule of charges that cannot be changed during that period. Banks send the schedule to the SBP and make it available to customers, and most now publish it on their websites. The SBP has also told banks to state which account types are exempt from charges, and it has required some services to be free, such as person-to-person transfers through the Raast instant payment system. A typical schedule lists charges on savings deposits and current deposits, on cash withdrawals, and on transfers, cheques and drafts.
Criticism and debate
Critics argue that overdraft and returned-payment fees mostly fall on customers who are already short of money, and that "free" accounts are often paid for by these penalties and by poor exchange rates. Banks reply that accounts cost money to run and that charges let them offer services without higher interest margins. Hidden or confusing fees can lead customers to leave the banking system altogether, adding to the number of people who are debanked or rely on cash. Rules on clearer pricing for cross-border transfers, such as the US Remittance Transfer Rule, grew out of the same concern.