High unemployment and the recession make every dollar especially precious these days. So why waste money on bank fees?

A new MoneyRates.com survey found that the monthly maintenance fees for checking accounts – the basic service fee you pay just for having an account – rose to an all-time high.

The average monthly maintenance fee on a checking account is now $14.39. Over the course of a full year, this would cost you $172.68 regardless of how you use the account.

Even though most checking accounts charge monthly maintenance fees these days, they can be avoided. There is also room to save a significant amount of money on other types of checking account fees, such as overdraft fees and ATM fees.

The latest MoneyRates.com Checking Account Fee Survey shows that the gulf between free checking and what most banks charge for checking is widening. This information can help you spot a better, less expensive checking account among the options you evaluate.

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Trends in Checking Account Fees 2020

Checking account fees come in several different forms, but the Checking Account/ATM Fee Survey focuses on those that most impact consumers. The most important trends to watch are monthly maintenance fees, overdraft fees, and ATM fees.

Monthly maintenance fees rose to all-time highs

Monthly maintenance fees are assessed month in and month out – so it’s especially significant that those monthly maintenance fees have risen to an all-time high.

The average of these fees is now $14.39 per month. That comes to $172.68 per year, which is a big chunk to have taken out of your checking account balance.

This average annual cost has risen $3.12 in just the past six months. That brings the increase in the annual cost of having a checking account to a total of $27.72 in the past eight years, showing that these fees have been rising steadily for some time now.

Overdraft fees dropped slightly

While overdraft fees remain high, they did decline a little in the most recent survey.

The average overdraft fee is now $32.11, down 19 cents from $32.30 six months ago.

Still, $32.11 is a lot of money to pay, and the thing about overdraft fees is that they are often charged for each transaction you have while the account is overdrawn. So you could end up paying several times that amount for losing track of your account balance just once.

If you have a habit of overdrawing your account, one thing you can do is look for banks that cap the number of overdraft fees they charge on any given day. This can greatly limit the damage from an overdraft.

There are even a few accounts that don’t charge overdraft fees at all. However, if you overdraw any account regularly or fail to cover your overdrafts, you are likely to have the account canceled.

Some ATM fees fell

ATM fees were a mixed bag in the latest survey, with one type rising overall while another type fell. The real trick to saving on ATM fees remains a matter of how you use the machines.

Banks generally don’t charge you anything if you use one of their own ATMs or a machine that is part of a network to which the bank belongs.

However, if you use out-of-network ATMs, you are likely to get hit by two fees: one from your bank and one from the operator of the machine.

The first kind of fee, the ones banks charge their customers for using an out-of-network machine, fell on average in the latest survey. Those fees now average $1.65, down 18 cents from the previous survey.

However, the fee banks charge non-customers for using their machine rose by 12 cents, to an average of $2.98.

That brings the combined total you are likely to pay for using an out-of-network machine to $4.63.

Free Checking – Avoid Rising Fees

There is some good news. Even as monthly fees continue to rise, free checking is not yet dead.

The latest survey found that 35.7% of checking accounts do not charge a monthly maintenance fee. This may be the minority of accounts, but it is a large enough percentage to give you a fair number of choices.

So if you don’t have a big enough checking account balance to qualify for a fee waiver, there is a way for you to avoid monthly maintenance fees. A little shopping around should present you with multiple options.

In particular, online banks and smaller banks are good places to look if you want to find a checking account with no monthly fee.

Average balance qualifying for a waiver of monthly maintenance fees

Nearly two-thirds of all checking accounts charge these fees. While some accounts offer a waiver of these fees if you maintain a certain minimum balance, the average balance required to qualify for a fee waiver is now $18,985.68.

As bank fees continue to rise, the clear trend after 11 years of conducting the study remains that there’s a huge gulf between the cost of online bank accounts and the cost of traditional, branch-based accounts.

While only 30% of branch-based checking accounts have no monthly fee, 72% of online checking accounts do not charge a monthly fee.

Also, among online banks that do charge monthly fees, the average balance required to qualify for a fee waiver is much lower than at branch-based banks.

Comparing online vs. branch-based account fee-waiver requirements

On average, it takes a balance of $19,784 to qualify for a monthly fee waiver from a branch-based account. With an online account, the average balance to qualify for a waiver is just $1,312.50.

Online accounts also offer a significant break on overdraft fees. On average, overdraft fees are nearly $5 per occurrence less for online accounts than for branch-based banks.

 Best Checking Accounts for Minimizing Overdraft Fees

Where are the Worst Checking Account Deals?

It’s bad enough that checking account fees in general are rising. What makes this even worse is that many customers pay more than the average fee.

The average is based on the total sample of accounts surveyed; but within that sample, the largest financial institutions naturally have the most customers. That’s unfortunate because the largest banks also tend to be the most expensive banks.

MoneyRates.com defines large banks as those with at least $15 billion in deposits. Medium-sized banks have between $5 billion and $15 billion in deposits, and small banks are those with less than $5 billion.

Fees are higher at large financial institutions

The average monthly service fee among large banks in the latest survey was $17.13. This would represent a cost of $205.56 per year, or nearly $33 more than the overall average.

Maintenance fees are also harder to avoid at large banks. Just 28.8% of large bank checking accounts are free of these monthly fees compared to 40% of accounts at medium-sized banks and 45% of accounts at small banks.

Overdraft and ATM fees are also generally higher at large banks.

Large banks may have the most visible branch networks and the best-known, household names. However, if cost matters to you, it’s easy enough to find slightly less well-known alternatives that offer you much better deals on checking accounts.

 How Many Bank Accounts Should I Have?

How to Save Money On Your Checking Account

Given the rising cost of checking account fees, it’s more important than ever to take advantage of opportunities to save money on your checking account.

Fortunately, there are several ways to do this:

  1. Always shop around and compare fees before choosing a bank.
  2. Check for fee waivers and whether or not you can qualify for them.
  3. If you don’t have a large enough balance to qualify for a fee waiver, look for a free checking account with no monthly fee.
  4. Look for an account with low overdraft fees, or even one of the few accounts with no overdraft fees.
  5. For accounts with overdraft fees, be aware of whether there is a cap for the number of such fees that can be charged on any given day.
  6. Check your balance online and develop good bookkeeping habits to avoid overdrafts.
  7. Only use ATMs that are within your bank’s network, unless your bank has a policy of refunding ATM fees during the statement cycle.
  8. Consider an online checking account to increase your chances of avoiding monthly fees and lowering overdraft and ATM fees.
  9. Look beyond the largest banks, since these often have the heaviest fees.

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Methodology: How MoneyRates.com Tracks Checking Account Trends

The MoneyRates.com Checking Account Fee Survey is conducted every six months. It is based on fee information from over 300 checking accounts offered by the 100 financial institutions that make up the MoneyRates Index.

The MoneyRates Index is made up of 100 banks which represent a cross-section of the industry. This includes the 100 largest retail deposit institutions in the United States, plus 25 medium-sized banks and 25 small banks.

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