A transaction fee is a charge imposed by a bank or payment provider for processing a transaction. It can be a fixed amount, a percentage, or both. Banks charge fees for wire transfers, overdrafts, foreign transactions, ATM withdrawals, and account maintenance. Payment processors charge merchants a percentage of each sale. The fees are how financial institutions get paid for moving money.

The fees vary widely. A domestic wire transfer might cost $25. An international wire might cost $45. An overdraft fee averages $35. A foreign transaction fee is usually 3 percent of the purchase. An ATM fee is $2 to $5, plus whatever the ATM owner charges. A merchant processing fee is 1.5 to 3.5 percent of the sale. For a small business, those percentages add up quickly. A retailer with $1 million in card sales might pay $30,000 in processing fees.

Fees are a major source of bank revenue. In the United States, banks collect over $10 billion a year in overdraft fees alone. They also collect billions in ATM fees, wire fees, and account maintenance fees. Regulators have pushed back on some fees, but not all. The Consumer Financial Protection Bureau has proposed rules to limit overdraft fees and credit card late fees.

Consumers can avoid many fees by choosing the right bank. Online banks often charge no maintenance fees, reimburse ATM fees, and waive foreign transaction fees. Credit unions tend to have lower fees than large banks. Reading the fee schedule is the first step. The second is asking for a waiver. Banks often waive fees for loyal customers who ask.