The nature of banking has changed over the past decade and today banks often make a higher profit margin on fees than traditional banking products (such as loans). This trend began with the appearance of the automated teller machine – a device that does in fact give banking customers a new level of convenience, but at the same time, gives the bank itself an opportunity to cut costs and increase fees. The ATM marked the first time in banking history that customers would potentially have to pay a fee to access basic banking services, and it has been an unparalleled success. The ATM means the bank can operate with fewer tellers. And although the bank will usually allow customers to use their own ATMs free of charge, the bank will charge non-customers for ATM use, and may even charge customers an extra fee for using ATMs out of their branch network.

The first step in reducing banking fees is to realise that all those services and conveniences the bank offers may not be free. Read the fine print and get a good understanding of what the fee structure is, and what you are being charged.

The second step is to realise that small dollars add up over time. If you routinely pay $20 a month in various fees and service charges, it may not sound like much, but if you consider the cumulative effect of those $20 every month over several years and the lost interest that you could have earned on it, it eventually adds up to thousands.

It is easy to avoid many routine banking fees. Most banks offer several different types of checking and savings accounts, some with fees, some with reduced fees, and some with no fees. One of the easiest ways to avoid fees is to take advantage of one of the mid-tier account offerings, which offer reduced fee or no fee accounts in exchange for keeping a minimum balance. That minimum is often low, and may be just a few hundred dollars. Keeping that minimum amount of money in each account will not only save you on fees, but will also minimise the possibility of overdrawing your account and incurring even more fees.

Overdraft fees are another tremendous source of income for banks, and source of frustration for bank customers. If your account is low, and you write a check that is just a few dollars over the limit, your bank may return the check and charge you a hefty fee which could be as much as $30. It may also happen that the first overdraft fee puts you even deeper into negative territory, and that causes another check to bounce, and another $30 fee to be levied, and a snowball effect takes place. Soon you can go from just a few dollars negative to over a hundred dollars negative just from writing one check. "Overdraft protection" service is an excellent convenience to sign up for, but it is important to note that use of this service should be kept to a minimum. While the overdraft protection may protect you from having your check dishonoured, you will still be charged a fee for the service each time you use it.