Consumer Comeback Blog

Free Checking May Soon Be Extinct, Overdraft Fees Here to Stay

Consumers who watch their budgets should be mindful of fees. An ATM fee here, a checking card fee there, all of it can add up quickly ad affect your bottom line.

For decades, consumers came to expect free checking and other services to come without strings attached, but those days may be over, according to says. Bankrate’s 2012 Checking Survey indicated that fewer banks are offering free checking and checking fees continue to increase.

According to the survey, 72% of Americans would switch banks if their checking account fees increased. If that’s the case, banks should prepare for a mass exodus of customers because Bankrate found that nearly a every bank they surveyed was raising checking fees, some with fees as high as 25% more. Free checking is dwindling, with only 39% of checking accounts being offered to all customers free of charge, a decrease from 45% last year. Consumers fed up with being nickel and dimed by banks might look into alternative forms of banking. Bankrate reported that 72% of credit unions offer free checking.

“Checking accounts that are free on a standalone basis continue to diminish. But a free checking account is still within reach of the majority of Americans, whether by getting the fee waived through direct deposit or moving to a bank or credit union that still offers free checking,” Greg McBride, Bankrate’s senior financial analyst, said in a press release. “And consumers that practice good financial habits should rarely – if ever – incur ATM and overdraft fees.”

Free checking still exists, but ironically, it is most often offered to customers with hearty bank balances. Even then, the minimum balance for a bank to waive the checking maintenance fee has increased 23% from last year to $723.02. In general, those monthly fees have increased an average of 25% to $5.48 per month.

If you should fall short of cash or lose track of your spending, you will likely pay an overdraft charge, or insufficient fund fee, which increased 1.4% to a record high of $31.26. Residents of Denver will pay the most in overdraft fees, with an average of $33.60, whereas San Francisco residents will only pay $28.35.

Need cash on the go? Be prepared to budget a little extra every time you visit an ATM because surcharges have increased for the eighth straight year and hit a record high this year. For the first time in the survey’s 15 year history, 100% of the banks surveyed reported charging surcharges when non-customers use their ATMs. If you use an out of network ATM machine, you may pay an extra $2.50 to the owner of the ATM, and an extra $1.57 out-of-network fee. This is the eighth straight year that the average ATM surcharge increased.

Some cities have higher surcharges than others, with Denver consumers paying the highest out-of-network fees at $2.80, followed by New York and Seattle at $2.70, and San Francisco and Houston at $2.69. Conversely, ATM users in Minneapolis only pay $2.20.