Many banks have been introducing new fees over the last year in response to a wave of new financial regulations. If you haven't been paying close attention to your accounts, you may be surprised to find new charges on your banking statements.
TUTORIAL: Banking: Safeguarding Your Accounts
1. Monthly Service Fees
Many people are accustomed to getting free checking accounts through the major financial institutions. However, many banks are now putting an end to free checking accounts, since they can turn unprofitable when customers use too many bank services, but do not hold a sufficient amount of money in the account. Although the days of free checking are not yet over, these accounts are becoming harder to find. Virtually all of the major U.S. banks have ended their free checking accounts for new customers within the past year. The fees being charged vary by bank, depending on the level of services offered.
The monthly fees can typically be avoided, but only if you are willing to adhere to an increasingly complex series of requirements. Generally, customers must have money directly deposited to their accounts, maintain a sufficient monthly balance or buy other bank products.
For those that do not need access to a large network of physical branches, there are many options for free checking, with online banks and credit unions. Major players in the online banking arena include: Ally Bank, Charles Schwab Bank and ING Direct. (For more, see Cut Your Bank Fees.)
2. New Debit Card Fees
According to the Wall Street Journal, many banks are considering charging annual fees of around $25-30 to use debit cards. Other proposals reportedly under consideration include limiting the number of monthly transactions allowed and placing a cap of $50-100 on the maximum transaction size allowed by the cards.
If banks do begin to charge annual fees for debit cards, one way to avoid fees without sacrificing the convenience of using a card will be to move to a credit card, and simply pay the balance in full each month. Many credit cards do not charge annual fees, and some even offer rewards programs that provide extra value to the consumer.
Other customers might prefer to use preloaded value cards where money is placed on the card in advance. This can be a good solution, but consumers must be cautious to avoid cards with high fees.
3. Overdraft Protection Fees
New regulations may have put an end to automatic enrollment into overdraft protection plans, but overdraft fees are still alive and well. Following marketing efforts by many banks, significant percentages of customers opted in for overdraft protection, allowing banks to continue charging these fees. In addition, many bank customers do not realize that the new regulations affect overdrafts caused by debit card and ATM transactions. Customers are still automatically enrolled in overdraft protection for checks or electronic transfers from their accounts.
The best way to avoid overdraft fees is to monitor your account balances and maintain a cash buffer in accounts used for day to day checking transactions. This way, you won't have to scramble if a paycheck is posted late or a check clears earlier than expected. (If you've ever overdrawn your checking account, you know how painful those overdraft fees can be. For more, see When Good People Write Bad Checks.)
4. Higher ATM Fees
Using an ATM that does not belong to your bank is likely to cost you more. Many banks are increasing their ATM fees for so-called out of network users. Other banks, which previously offered to reimburse these fees, have ended their reimbursement programs. The only way to avoid these increase fees is to plan ahead for when you will need cash, and only use ATMs provided for free from banks where you hold an account.
5. Fee for Teller Services (BoA)
Bank of America offers a free "eBanking" checking account if you do all of your transactions online or using self-service methods. You also have to sign up to receive all of your banking correspondence and statements electronically. This type of account could be a good compromise for customers who can normally conduct all their transactions online, but still need occasional access to physical branches and ATMs. Using this type of account, you still have access to teller services, but if you use them, you will incur a fee $8.95 for that month.
The Bottom Line
The major banks may be trying to raise fees, but an informed customer still has many options to obtain convenient banking services at a reasonable price. (Unfortunately, this business tends to focus on sales rather than customer service. For more see Bank Advisor Blunders And How To Avoid Them.)