If you have a checking account that has lots of fees you are not alone. Millions of Americans are feeling the burden of checking account fees. Take, for example, non-bank ATM fees, which can actually hit you twice – one from the ATM’s company and another from your bank. It is not uncommon to face fees of 6 dollars or more for using an ATM that is not part of your bank’s network. About three out of four banks charge this fee. Another fee some banks charge is for every check written in excess of 10 checks a month. Then of course there are overdraft fees, which have greatly subsidized the bank’s cost for offering those free checking accounts so many take advantage of. Did you know that overdrafts ended up costing Americans over $24 billion in 2013? Some banks also charge a small fee every time you use your debit card. Every fee you pay is less money in your checking account. Even if the fees are small, they add up quickly, and by the end of the year it can be a hefty chunk of money. That money is better spent or saved elsewhere than it is helping to increase your banker’s profit margin.
Some people think that an interest-bearing checking account will earn them money, but they neglect to consider the cost of owning these types of accounts. While not every bank has costs associated with them, most do. For example, interest bearing accounts tend to have high minimum balance requirements to them (generally in excess of $5000), and if you should happen to dip below that minimum most banks will assess you a fee. The average monthly service charge for these accounts is around $12.00, so unless you are sure you can always maintain a high balance, you will likely lose money on an interest bearing account. You could opt to sign up with an online bank, which generally do not charge fees, but you may still be required to carry a high balance. The fees for interest-bearing accounts can be quite high and offset the paltry interest you will gain, which is typically around 0.01% to 0.05% for brick and mortar banks and between 0.50% and 0.25% for online checking accounts such as through Bank5 Connect.
Banks tend to offer a few options when it comes to checking accounts, so you should visit the bank’s websites to compare the various checking accounts they offer, and the associated fees and perks for each account type. Some accounts might, for example, offer free checks, but have a fee for keeping the account open. If you are like many of us who tend to pay bills online, it may be cheaper for you to simply buy a pack of checks from a check company or your bank directly. Some banks waive certain fees if you agree to go with paperless account statements. Make sure the bank you choose provides the services you require without a fee, or if there is a fee, that it is set at a reasonable amount. Some banks charge for things such as duplicate statements, a cashier’s check, and stop payment requests.
Free checking accounts are a good option, but should be aware that most free checking accounts are not really free, and in some way you are technically paying for the account. Paying for that account could be as simple as you maintaining several accounts with the bank in question, such as Certificate of Deposits (CDs) and a line of credit, such as a credit card issued by your bank. Free checking accounts might also have a minimum balance requirement, which means you are giving the bank a free loan with your money since the account will not be paying you interest. You also need to be aware that free doesn’t mean there can’t be other fees associated with the account. The bottom line is read all the fine print and choose the best account for you with the lowest possible fees.
Here are some tips for avoiding fees with a free checking account:
• Using only Bank ATMs and ATMs within your bank’s network.
• Go with paperless account statements, as this often waives certain account fees
• Avoid accounts with maintenance fees and service fees
• Avoid over-drafting your account or bouncing any checks resulting in a non-sufficient funds (NSF) fee
• Set up overdraft protection by linking your account to a saving account, a credit card, or a line of credit with your bank to avoid any overdrafts.
• Going with an online bank’s free checking account. Most online banks carry little (if any) fees outside of NSF fees which are avoidable.
• Avoid banks that add a fee for every debit purchase, as many banks are now adding these small fees to make up loss of other fee income due to law changes.
• Consider opening a checking account with a credit union or a community bank, as these banks tend to have very little in the way of fees.