Rising costs have led many consumers to cut costs in order to make ends meet. But one area they may be neglecting: their checking account fees.
According to a new report by Bankrate, more than 1 in 4 checking account holders are still paying fees every monthand for nearly half of them (48%) it comes at the steep cost of sacrificing saving for emergencies and paying down debt as a result.
How much Americans are losing in checking account fees
So how much are you actually losing in checking account fees? According to Bankrates report, those that do pay checking account fees are losing an average of $24 per month, or $288 per year.
Whats more, younger generations who tend to earn less and have lower net worths compared to older generations are paying more in fees each month. The report revealed that 46% of Gen Zers and 42% of Millennials were paying monthly fees, compared to just 22% of Gen Xers and 14% of Baby Boomers.
While an extra $288 per year may not seem like it could make or break your fortune, if invested properly and early or put in a high-interest savings vehicle, it could grow to become quite significant.
Say you decided to put $24 in a high-yield savings account with a 3.00% APY. If you took the average amount paid in fees (per month) by most Americans and put that money into your savings account every month, in five years youd have over $1,500 in the bank, give or take depending on how interest rates fluctuate over time.
Many are prioritizing fees over other financial goals
Extra fees can get in the way hitting important financial milestones.
If it werent for these checking account fees, those surveyed said that they had other ideas about how theyd make use of those funds such as paying down debt (30%), saving for emergencies (29%), saving for a major financial goal like buying a home or car (26%), and saving for retirement (17%).
Whats more, 31% of account holders are paying these extra costs to avoid the hassle of switching accounts and moving to a new bank or credit union. When it comes to financial institutions, the report showed that loyalty trumps allthe average checking account holder has been with their bank or credit union for 17 years.
Still, even the most loyal customer should keep tabs on their accounts terms and be aware of any possible charges they may incur.
Common fees you could be be overlooking
The types of fees youll be responsible for covering will vary from bank to bank, but a few common fees you could incur and the average cost you could expect to pay for each may include:
- Monthly fee for interest-earning checking accounts: $16.19
- Monthly fee for non-interest earning checking accounts: $5.44
- Overdraft fee: $29.80
- Non-sufficient funds fees (NSF): $26.58
- Out-of-network ATM withdrawal fees: $4.66
- Paper statement fee: $1$5
Before opening a checking account, its important to look at the fine print of your banking agreement, says Bankrate analyst Sarah Foster. And if youre someone whos banking with the same financial institution just because its the bank youve always had, be sure to regularly check your statement to be aware of any fees youre charged.
4 ways to save on fees
If your account fees are putting a dent in your monthly income, consider these three strategies for reducing or eliminating them altogether.
- Shop around for a free checking account. Not all checking accounts charge a monthly fee. In fact, 73% of checking account holders are taking advantage of free checking accounts and pay nothing in monthly fees, according to the report. Shop around and take the time to read individual account terms carefully. If you need some pointers, check out our list of the 10 best free checking accounts.
- Depending on the fee, you could ask your bank to waive the charge. Every bank has different rules and guidelines, but some may be willing to waive a charge if its your first time overdrafting or if you were incorrectly charged. If you see a charge on your statement, consider giving your bank a call to ask them if theyre 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 your monthly fee if you meet certain requirements like maintaining a minimum balance, having a certain number of qualifying charges per month, or enrolling in direct deposit. Read your account terms to learn about any ways you may be able to eliminate your monthly fee.
- Sign up for paperless statements. Many banks charge a fee for sending you paper statements in the mail. If you tend to toss them in the trash, consider opting for e-statements to save a few dollars each month.
These are just a few small ways to reduce your monthly costs, but bigger changes could be on the way. Lawmakers have taken notice of rising bank fees and are beginning to take action. In 2022, President Biden called on all agencies to reduce or eliminate hidden fees, charges, and add-ons for everything from banking services to cable and internet bills to airline and concert ticketsreferring to them as junk fees.
The possibility of a recession this year remains one of Americans biggest fears, and any downturn could bring pain to your wallet on top of already high inflation and interest rates. In extraordinarily uncertain times like these, experts recommend freeing up any amount of cash you can to recycle back into an emergency fund, says Foster. But before cutting the cable cords or eliminating a streaming service or two, switching to a no-fee bank and eliminating those checking fees could be an even easier place to start. The one-time task of moving your account is worth the long-term benefit of extra security.
