I read recently at Bankrate.com that checking fees have risen to a record level in 2012. “The banking industry finds itself in the middle of a fee-for-all.” Sounds a little like the airline industry doesn’t it?
I know what you’re thinking. “You’re probably going to ask me to switch banks, aren’t you?” If you’re at one of the big banks and are unhappy with the way you’re being treated, yes. If you’re happy and feel you’re getting your money’s worth, that’s great. You can probably skip this post and go read one of my other ones.
Here’s the problem. Banks have been limited in their ability to fee you for overdrafts and in what they charge for debit card swipe fees, so they’re looking elsewhere to increase revenue. They’re coming after you in other ways to make up the difference.
I remember when you could walk into just about any bank and open a free checking account, no strings attached. I opened my first account as a teenager in the early 2000s, and back then many banks were giving free gifts to people who opened accounts. Some offered cash. The only bank I’m aware of that offers a reward today is ING direct (soon to be Capital One 360), which gives you $50 for opening an Electric Orange account.
The best way to get free checking is to join a credit union or online bank. According the Bankrate report, 72% of the largest credit unions still offer free checking to their members. Many credit unions participate in an ATM network with other credit unions around the country, so if you use ATMs frequently look into this option before joining one. Many online banks, such as ING Direct and Charles Schwab, offer free access to any ATM in the country. The only downside for online banks is you can’t deposit cash. I get around this by depositing at my credit union and transferring it electronically to my checking account.
I know it’s a pain to switch banks. I’ve gone through the process a few times myself. The trick is to take your time. Give yourself a couple of months to transition your automatic payments. Leave enough money in the old account to cover any remaining drafts.
Now, what should you look for in a free checking account? Aside from FDIC insurance, the two most important features are no monthly maintenance fees and no minimum balance requirements.
Even at the biggest banks there are ways to avoid checking fees. Maintaining a minimum balance or a monthly direct deposit are the two most common ways to avoid fees. That’s great, but what if you lose your job? What sparked my search for a new bank in the first place was a letter from my old bank notifying me of a required direct deposit. I didn’t want something else to worry about if I became unemployed.
For those who won’t jump through the hoops, expect to pay a service fee averaging about $5.50 a month, or $66 a year. The price tags for overdrafts and out-of-network ATM withdraws will pinch you as well. If you insist on sticking with your big bank, use only their ATMs and don’t “opt-in” to overdraft protection.
In the end though, is the convenience of big banks enough to offset the higher fees? That’s a question only you can answer. As for me, I’m willing to inconvenience myself just a little to avoid fees and get better service.
Photo by nerdwallet.com/blog