How Bank Fees Make You Poorer

Banks have become an integral part of our lives. We use banks for everyday transactions, home or car loans, credit cards, and as a way to invest. Each of these products and services has a cost. It’s important to know these costs to ensure you’re minimizing expenses and maximizing benefits.

Bank Charges

The Biggest Money-Maker: Interest Charges

Banks get the most earnings from the interest charged on their products and services. Interest is the single largest income generator for banks.

Loans are risky: a bank cannot be certain that a lender will repay the loan. So, they charge high-interest rates for taking this chance. The greater the risk you pose to the bank, the higher the interest rate. For example, borrowers with weak credit scores will pay higher rates than those with stronger scores. The chance of default is higher for the 30-year loan than the 15-year loan. As a result, the current average 15-year fixed mortgage is 3.22%, while a 30-year term is 3.78%, per For auto loans, the average national rate for a 60-month term is 4.21%, according to ValuePenguin. Check out our calculators if you want to know how much interest you’ll pay over the life of a loan. You can find out the total interest costs on a 15-year or 30-year fixed-rate mortgage, and on an auto loan.

Credit card rates are even higher. According to WalletHub’s Credit Card Landscape Report, the average new offer credit card rate is 19.24%. The average existing account credit card rate is 14.14%. This equates to quite a nice profit the banks receive.

It doesn’t matter what type of loan it is; if you’re paying interest on the loan, you’re in debt. This eats away at your ability to save money and build wealth. For financial independence, the first step to take is to get out of debt A.S.A.P. Carefully review every loan before signing to determine if you truly need it and can afford the total cost. If you choose to continue with the loan, select one with the lowest interest rate that you qualify. For credit cards, the best way to avoid interest is to pay your balance fully and on time every month.

Adding Up All Those Bank and Credit Card Fees

Banks also earn income through bank fees against your savings, checking and other accounts. You may be charged for general maintenance of the account, optional services, or penalties for “mistakes” you make. Bank fees add a significant chunk to the total bank income. For more information on the most common bank fees, and how to minimize or avoid them, check out this article.

Credit card users may be familiar with credit card fees. Like bank fees, they may be generated due to maintenance or use of the credit card. Some of them are penalties for poor credit card use. You can read up more about them here.

Both bank and credit card fees cost too much and add up too quickly. You should know what you are responsible for and find ways to decrease or eliminate them.


The first step in getting your finances in shape is to understand where your money is going. Knowing your major expenses is key, and bank fees may be one of them. You’ll want to know as much as you can to select the best banking packages available. The banks are rich enough without getting more of your money.

Roman Zelvenschi

I started a digital marketing agency Romanz Media Group Inc. 12 years ago. Running my own business quickly taught me the importance of cash flow. Making sales was not enough, I had to have money in the bank to pay the vendors, staff and personal bills.

During those early stages of the company I learned how to get creative with debt and to save on interest cost. I paid for everything I could with a credit card to both get more points and to extend the payment date by 25 days (credit card grace period). I then utilized a 0% balance transfer offers to rotate this debt.

I learned a lot during this process and made a lot of mistakes. My key lesson is that the most important part of being financially independent is how much I managed to save, rather than how much I earned. Staying disciplined with savings and tracking spending is not easy and I tried many different methods to stay on track.

FinancialFreedom.Guru is a side project where I and my staff are trying to share the practical knowledge on how to understand finances and to build wealth.