Rising costs have caused many consumers to cut costs to make ends meet. But one area to watch out for: checking account fees.
According to a new report by Bankrate, more than 1 in 4 checking account holders are still paying monthly fees—and nearly half of them (48%) come up with expensive fees to sacrifice savings for emergencies and pay off debt as a result.
How much Americans lose out on checking account fees
So how much are you actually losing when checking account fees? According to a Bankrate report, those who pay checking account fees lose an average of $24 per month, or $288 per year.
What’s more, the younger generation who tend to earn less money and have lower income compared to the older generation pay more monthly expenses. The report states that 46% of Gen Zers and 42% of Millennials pay monthly expenses, compared to only 22% of Gen Xers and 14% of Baby Boomers.
While an extra $288 a year may not seem like it could make or break your fortune, if invested correctly and early or put into a high-interest savings vehicle, it can be quite significant.
Say you decide to put $24 in a high savings account with a 3.00% APY. If you take the average amount paid in expenses (per month) by most Americans and put that money into a savings account each month, in five years you’ll have more than $1,500 in the bank, give or take depending on how interest rates fluctuate over time. . time.
Many prioritize expenses over other financial goals
Additional fees can go a long way toward reaching important financial milestones.
If it weren’t for the cost of the checking account, those surveyed said they had other ideas about how to use the funds such as paying off debt (30%), saving for an emergency (29%), saving for a major financial goal like buying a house or car (26%) ), and saving for retirement (17%).
What’s more, 31% of account holders pay these extra fees to avoid the hassle of switching accounts and moving to a new bank or credit union. When it comes to financial institutions, the report shows that loyalty trumps all — the average checking account holder has been with a bank or credit union for 17 years.
However, even the most loyal customers should monitor their account terms and be aware of possible charges.
Common fees you may face
The types of fees you will be liable for will vary from bank to bank, but some common fees you may incur and the average fees you may pay for each may include:
- Monthly fee for an interest-earning checking account: $16.19
- Monthly fee for an interest-free checking account: $5.44
- overdraft fee: $29.80
- Non-sufficient funds fee (NSF): $26.58
- Out-of-network ATM withdrawal fee: $4.66
- Paper statement fee: $1–$5
“Before opening a checking account, it is important to look at the fine print of the banking agreement,” says Bankrate analyst Sarah Foster. “And if you bank with the same financial institution just because it’s the bank you’ve always banked with, make sure you check your statement regularly to see what fees are being charged.
4 ways to save money
If your account fees are cutting into your monthly income, consider these three strategies to reduce or eliminate them altogether.
- Shop around for a free checking account. Not all checking accounts charge a monthly fee. In fact, 73% of checking account holders take advantage of free checking accounts and pay no monthly fees, according to the report. Shop around and take the time to read the individual account requirements carefully. If you need some pointers, check out our list of the 10 best free checking accounts.
- Depending on the fee, you can ask the bank to cancel the fee. Each bank has different rules and guidelines, but some may be willing to waive the fee if you’re overdrafting for the first time or if you’ve been charged incorrectly. If you see a bill on your statement, try calling your bank to ask if they’re willing to work with you and waive the fee.
- Try to maintain a balance in your account to avoid overdrafts. Not all checking accounts are free, but some will waive the monthly fee if you meet certain requirements like maintaining a minimum balance, having a certain qualifying fee amount each month, or signing up for direct deposit. Read your account terms to learn how you can waive your monthly fee.
- Sign up for a paperless statement. Many banks charge a fee to send a paper statement in the mail. If you tend to throw it in the trash, consider opting for an e-statement to save a few dollars a month.
These are just a few small ways to reduce your monthly expenses, but bigger changes may be in the offing. Lawmakers have taken note of the increase in bank fees and are starting to act. By 2022, President Biden has called on all agencies to reduce or eliminate hidden fees, charges, and surcharges for everything from banking services to cable and internet bills to airline and concert tickets — he calls them “junk fees.”
“The possibility of a recession this year remains one of America’s biggest fears, and any downturn could cause pain in your wallet on top of inflation and already high interest rates. In times of uncertainty like these, experts recommend releasing any money that can be recycled into an emergency fund,” Foster said. “But before you cut the cord or ditch a streaming service or two, switching to a no-fee bank and ditching those checking fees might be an easier place to start. The one-time task of moving your account has the long-term benefit of extra security.