Every bank has a slew of fees associated with opening and maintaining accounts, and those fees are on the rise. A recent study by Bankrate.com found that only 39% of non-interest checking accounts are free of a monthly charge. That's down from last year's 45% and a high of 76% in 2009. The average monthly service fee has jumped 25% from last year. Here are four of the most expensive mistakes you can make with your bank accounts.
Using Overdraft Protection
At most banks, you can choose to allow your account to go into negative territory to allow a purchase to go through. Banks charge dearly for that service. The average overdraft fee is $31.26, and many banks charge upwards of $35 per item. Federal consumer protection law now requires that you have to choose this service. If you have done so, the danger lies in running your account close to the zero line if you have an unexpected charge go through. The overdraft fee adds to your negative balance and can cause more transactions to trigger the overdraft. For example, you may have thought there was $100 in your account and forget that your car insurance is charged automatically. Each additional transaction will trigger further overdraft fees, and your negative balance can grow quickly. Monitor your account closely to ensure that the funds are there to cover your transactions.
Not Maintaining the Minimum Balance
Many banks reduce or even eliminate monthly maintenance and other fees if you keep a certain amount of money in your account at all times. This fee break can often outweigh any interest you receive in a savings account. It's often worthwhile to keep the minimum in your checking account to bring the fees down. According to the Bankrate.com survey, the average balance to avoid the fee for non-interest checking accounts is $723. That's higher than the previous year by 23%.
Writing Post-Dated Checks
In the United States, a personal check is nothing more than a promise to pay someone. It does not represent actual payment until it is presented at a bank and the money is withdrawn from your account. Post-dating a check to a future date indicates your intentions to the recipient to wait until that date to present the check to the bank. However, banks have the upper hand and are legally allowed to honor checks when presented. If the recipient is not someone you trust, it is safer to hold on to the check until the future date to avoid having it create havoc on your bank balance. The convenience of providing post-dated checks is outweighed by the risk to your account.
Using Other Banks' ATMs
Almost all banks charge a fee when users who are not customers use the ATM. Some also charge a fee when their own customers use another bank's ATM. These fees are also on the rise. The average charge for non-customers is $2.50 per transaction, and the average cost for customers using another ATM is $1.57. The easiest way to avoid these fees is to plan your cash flow more closely so that you do not need to hit up the ATM or that you can use your own bank's machine. Some banks refund other institutions' transaction fees, so look for accounts with this feature.
The Bottom Line
With bank fees going up year after year, it is more important than ever to ensure that you know the ins and outs of bank fees, are paying the least amount, and keeping the money in your pocket. Know what your bank's policies are, and be on the lookout for lower-fee accounts.