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These bank fees can ruin your budget. Here’s how to avoid them

These bank fees can ruin your budget.  Here's how to avoid them

Manage finances in a non-traditional relationship

If you’re not careful how you manage your money, you can incur hefty bank fees that could otherwise be avoided.

Between overdraft or insufficient fund fees, charges for interest-bearing and non-interest-bearing checking accounts, and ATM fees, a significant bite can be taken out of your budget, according to Bankrate.com’s latest checking account and ATM fee study.

The personal finance website’s research looks at how expensive those penalties can become and how to avoid them.

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Some of the costliest fines — overdraft fees — fell to a 13-year low for the average fee, which now stands at $29.80.

“Despite all the attention given to a handful of banks adopting more consumer-friendly overdraft policies, 96% of accounts still charge overdraft fees,” says Greg McBride, chief financial analyst at Bankrate.com.

Overdraft and insufficient fund fees

The average overdraft fee of $29.80 is down 11% from last year, according to Bankrate.com. Overdraft fees are typically charged after a payment is processed despite insufficient funds in an account.

Meanwhile, the average fee for non-compliant funds is now $26.58, down 21% from last year. Insufficient funds fees are typically charged after a payment is declined due to insufficient funds in an account.

Just how high those fees are varies by metropolitan area, Bankrate.com found.

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Pittsburgh had the highest average overdraft fee at $35.50, followed by Cleveland at $34.84 and Denver at $34.45. Meanwhile, Miami had the lowest average overdraft fee at $21.05, followed by Washington, DC, at $22.95 and San Francisco at $23.76.

There are a few key ways to avoid these fees, according to McBride.

By keeping track of your available account balance before you start transactions, you may be able to avoid overdraft if a check you deposited, for example, still hasn’t cleared.

Also, linking your checking account to a small savings account at the same bank can act as a buffer that prevents the bank from charging a fee to cover the shortfall temporarily, McBride said.

Checking account maintenance fees

Interest checking accounts now charge an average monthly fee of $16.19, down from $16.35 last year, both record highs, according to Bankrate.com.

The average balance needed to avoid a monthly fee is now $9,658, down 2.4% from $9,897 last year.

However, this year’s average required balance is up 28% from $7,550 in 2020, which was a record at the time, according to Bankrate.com.

Despite the high fees and balance requirements, interest checking accounts have record low average returns of 0.03%.

Make sure you aren’t suddenly incurring fees or that there isn’t a balance requirement set in place.

Greg McBride

chief financial analyst at Bankrate.com

Most interest checking accounts – 75% – have some sort of balance requirement. Still, 15% of those accounts will waive those direct deposit fees and 7% of these accounts are free.

Nearly half of no-interest checking accounts — 46% — are “free” and have no monthly fee or balance requirements. For those who do charge, the average monthly fee is now $5.44, up 7% from $5.08 last year. The average balance requirement to avoid those fees is $539.04, a 6.4% increase from $506.62 last year.

More than half of free accounts — 53% — will waive monthly fees based on direct deposits, account balances or transaction activity, or a combination of direct deposit and transaction activity, Bankrate.com found.

Still, consumers may want to avoid fees by looking for a free checking account without a balance requirement or monthly fees, McBride said.

Even if an account does have a monthly fee, you may be able to waive it by setting up direct deposit, he said.

Also, be sure to check the fine print for all your bank statements and correspondence.

“Make sure you’re not suddenly incurring fees or that there isn’t a balance requirement set in place,” McBride said.

Out-of-Network ATM Fees

D3 sign | Moment | Getty Images

ATM surcharges, where non-customers make withdrawals and incur a fee charged by an ATM owner, now stand at a record average of $3.14.

While every ATM-owning bank charges non-customers for withdrawals, many banks do not charge their own customers to go outside their network.

The average fee among the banks that do charge customers who go outside their network is $1.52, up from $1.51 last year.

Combining both ATM fees, the average total cost of an out-of-network withdrawal is now $4.66.

These fees vary by metropolitan area, with Atlanta having the highest average ATM fee at $5.38. It is followed by Detroit at $5.29 and Phoenix at $5.24.

Los Angeles had the lowest average ATM fee at $4.21, followed by Seattle at $4.23 and Minneapolis at $4.24.

These fees are especially avoidable.

“Plan ahead where and when you make the withdrawal and aim to do it within the network,” McBride said. “Don’t make a habit of making out-of-network ATM withdrawals because the fees can add up quickly.”

Manage finances in a non-traditional relationship

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