Question of the Day: What is the Average Annual Cost of a Checking Account (and Other Trends in Bank Fees)?
Answer (from Bank Fees Survey EOY 2014): Over $154
Headline for this survey could be “Bank Fees Continue Rise to Record Levels.” Assign this reading to your students during your banking/checking unit to help familiarize them with checking terminology, the fee structure of checking accounts and the importance of comparison shopping.
- Banks in survey set: “A sampling that includes the 50 biggest retail banks by deposits, plus an equal number of smaller financial institutions…”
- Fees analyzed (good proxy for what is important in selecting a checking account): “…monthly maintenance fees, overdraft fees and ATM fees, and also tracks the account minimums necessary to open an account and avoid a monthly maintenance charge.”
- Maintenance fees: “Monthly maintenance fees are up by 18 cents, to an average of $12.87.”
- Minimum balance required to avoid maintenance fees also continued to climb: “The average such requirement increased by $268.76 over the past six months to $5,708.76.”
- Only 26% of banks surveyed were free of maintenance fees; down from 28% six months ago.
- Note that as a student, many banks will offer low or no-fee checking accounts as an enticement. These deals typically end once you are no longer a student.
- ATM fees: ‘The average fee charged to customers who use an out-of-network machine increased by 9 cents, to $1.61. The average surcharge for non-customers using a bank’s ATMs increased by 14 cents, to $2.65.”
- Overdraft fees: “The one exception to this rising fee trend is that the average overdraft fee declined slightly over the past six months. However, this decrease was by just 1 cent, and at an average of $32.47 per occurrence, overdraft fees are still far from a bargain.”
The survey goes on to show the lower fee structure of online banks (note the proliferation of online bank ads on the page):
- Maintenance fees: 63% don’t have monthly fees vs. 24% of traditional accounts.
- Lower ATM fees
- Lower overdraft fees
The author goes on to make an impassioned plea for consumers to comparison shop and choose the lower-cost option:
“The point is that consumers are paying a steep price for flocking to large, name-brand banks. A little bit of comparison shopping, with an emphasis on smaller or online banks, could yield a much better deal for a large number of consumers.”
Lesson extension: Good opportunity to have students conduct online research to do a more thorough pros/cons of online banks.
Check out the NGPF Activity on Selecting A Checking Account to hone your students comparison shopping skills
About the Author
Tim's saving habits started at seven when a neighbor with a broken hip gave him a dog walking job. Her recovery, which took almost a year, resulted in Tim getting to know the bank tellers quite well (and accumulating a savings account balance of over $300!). His recent entrepreneurial adventures have included driving a shredding truck, analyzing executive compensation packages for Fortune 500 companies and helping families make better college financing decisions. After volunteering in 2010 to create and teach a personal finance program at Eastside College Prep in East Palo Alto, Tim saw firsthand the impact of an engaging and activity-based curriculum, which inspired him to start a new non-profit, Next Gen Personal Finance.