Service charge

What is a service charge?

A service charge is a fee charged to customers for something specific, such as a bank charging a fee for using an ATM that’s not part of its network or a vendor charging a fee for making a payment with a credit card. It also may be called a customer service fee or maintenance fee.

Deeper definition

Companies typically charge a service fee for things that go beyond the scope of purchasing their goods and services or having a relationship with them. This includes things that require more work on the company’s end or more individual interaction between the customer and company representatives.

For example, when you buy a concert ticket or book a hotel room, you’re not just paying to see the performer or stay in the room. There are several other things the company must do as part of providing the service, such as hiring security for a concert or paying people to clean and prepare the hotel room.

While the service charge is an extra fee tacked on beyond the basic cost of the product or service, it is not optional. To purchase the product or service, the customer also must pay the service charge, which is whatever amount the company chooses.

Many banks charge service fees for things such as falling below a minimum required balance, receiving a paper statement, making a foreign transaction or replacing a debit card. Some banks even require an account to be open for a minimum period of time and will charge an early closure fee if the account is closed before that time.

Service charge example

If you have a checking account, you may incur several service charges. For example, your bank may charge a monthly maintenance fee simply for having an account with them. The bank may waive the fee if you exceed a specific number of transactions each month or meet other conditions.

You also may pay a service charge to receive a paper statement each month, to get cash from ATMs that belong to other banks or when you bounce a check.

Want to avoid fees? Here are seven financial habits that increase bank fees.

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