What is a Bank Charge?

A bank charge refers to any fee or cost imposed by a bank on its customers for using specific banking services or for certain account-related activities. These charges can vary depending on the type of service, the bank's policies, and the customer's account agreement.

Types of Bank Charges

There are many types of charges that a bank may impose on its customers, including the following:

Monthly maintenance fee. This fee is charged for maintaining a bank account, often associated with checking or savings accounts.
Overdraft fee. This fee is incurred when a customer withdraws more money than is available in their account.
ATM fee. This fee is charged when a customer uses an ATM outside of the bank's network.
Transaction fee. This fee is imposed for processing certain types of transactions, such as wire transfers or international transactions.
Account closure fee. This fee is a penalty for closing an account before a specified time period has elapsed.
Card replacement fee. This is a charge for issuing a new debit or credit card if the original is lost or damaged.
Late payment fee. This is a penalty for failing to make a loan or credit card payment on time.
Foreign transaction fee. This fee is charged when making purchases or withdrawals in a currency other than the account’s native currency.
Minimum balance fee. This is a charge for not maintaining the required minimum balance in an account.
Dormancy fee. This fee is charged for accounts that have been inactive for an extended period.

Accounting for Bank Charges

A business that incurs bank charges will usually record them as expenses as part of its monthly bank reconciliation process. These expenses are typically classified as administrative expenses, and so will be included in the general and administration section of the reporting entity’s income statement. These expenses are not classified as cost of goods sold expenses, since they are not related to the sale of goods or services.