Impose

The term "impose" refers to the act of placing a fee, levy, tax or charge on an asset or transaction to the detriment of the investor. The imposition of fees is a common practice in most investment products and services, and may be used as a deterrent to selling or exiting a financial position early.

Fees are inevitable, regardless of whether you are a small retail investor or a multinational investment bank. Just about every financial service involves a payment to the party that helps to facilitate the transaction. Most fees should be made known to investors before they purchase a new security or move funds in a way that will incur a charge of some kind. Many fees are imposed not at the time of transaction, but instead levied on an annual basis as a percentage of assets or holdings.

Since the 2008 financial crisis, more and more banks have imposed fees on customer accounts and transactions. The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 implemented a number of new regulations and rules for the finance industry, which translated to more fees for banking customers. The Durbin Amendment to the Dodd-Frank Act placed a cap on the fees banks may charge to merchants for processing debit card purchases, which meant even higher fees for account holders. Furthermore, according to the Federal Reserve, banks can only charge customers overdraft fees on debit card transactions if the customer opts in.

Banks also impose fees at ATMs, because ATM fees make these off-premises banking options more profitable. Often, the bank that owns the ATM imposes a fee, and the bank that issued the customer’s debit card, if it is a different bank, imposes its own fee. This can lead to total ATM fees of $11 or more in some locations.

Other types of fees banks might impose include:

• Foreign transaction fees
• Minimum balance fees
• Returned deposit fees
• Overdraft fees
• Annual or monthly maintenance fees
• Early account closure fees
• Paper statement fees
• Lost debit card fees
• Returned mail fees
• Fees for redeeming rewards points
• Fees for using a human teller

Large banks charge the most fees, because larger banks – those with assets of $50 billion or more – are less efficient than smaller banks, and must pay more to maintain common demand-deposit accounts. Increasingly, banking customers are choosing to avoid the imposition of most fees by banking with smaller community banks or credit unions.