Personal finance

These bank fees could be taking a bite out of your budget. Here’s how to avoid them

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If you’re not careful how you manage your money, you could be incurring hefty bank fees that may be otherwise avoidable.

Between overdraft or non-sufficient fund fees, charges for interest and non-interest checking accounts and ATM fees, a substantial bite could be taken out of your budget, according to Bankrate.com‘s latest checking account and ATM fee study.

The research from the personal finance website takes a look at just how expensive those penalties can get and how to avoid them.

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Some of the most expensive penalties — overdraft fees — have declined 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 that are adopting more consumer-friendly overdraft policies, 96% of accounts still charge overdraft fees,” said Greg McBride, chief financial analyst at Bankrate.com.

Overdraft and non-sufficient 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 non-sufficient funds fee is now $26.58, a 21% decline from last year. Non-sufficient fund fees are typically charged after a payment is rejected due to a lack of funds in an account.

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

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

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

By keeping tabs on your available account balance before you initiate transactions, you may be able to avoid overdrawing if a check you deposited still hasn’t cleared, for example.

Additionally, if you link your checking account to a small savings account with the same bank that can act as a buffer stopping the bank from assessing a fee for temporarily covering the shortfall, McBride said.

Checking account maintenance fees

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

The average balance required 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 28% higher than $7,550 in 2020, which was a record at the time, according to Bankrate.com.

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

Make sure you aren’t suddenly incurring fees or that there hasn’t been a balance requirement that’s been instituted.
Greg McBride
chief financial analyst at Bankrate.com

Most interest checking accounts — 75% — have some kind of balance requirement. Yet 15% of those accounts will waive those fees for direct deposits and 7% of these accounts are free.

Almost half of non-interest checking accounts — 46% — are “free” and come with no monthly fee or balance requirements. For those that 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 seeking 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 get that waived 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 aren’t suddenly incurring fees or that there hasn’t been a balance requirement that’s been instituted,” McBride said.

Out-of-network ATM fees

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ATM surcharge fees, whereby 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 for going outside of their network.

The average fee among those 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. That 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, with $4.24.

Notably, these fees are avoidable.

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

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