Beware of Rising Bank Fees

Study shows fees charged for checking accounts reach all-time high, but vigilant customers can avoid them.

Banking customers are paying more than ever for their checking account services, according to a study released Monday.

The miscellaneous fees that customers pay to maintain and use interest-bearing checking accounts have risen to an all-time high, according to a study released by personal finance company Bankrate.com.

ATM surcharges, bounced check fees and monthly service fees all increased from September 2007 to September 2008, the study showed, continuing an upward trend.

"[Fees] have been going up for years," said Greg McBride, senior financial analyst with Bankrate.com. "Some of those fees have outpaced the rate of inflation."

Average ATM surcharges rose nearly 11% to $1.97, up from $1.78 last year, while the cost of using an ATM machine that belongs to another bank rose to an average of $1.46 from $1.25, or about 17% higher than last year, according to Bankrate.com.

The study also showed that fees for bounced checks rose 2.5% this year to $28.95 on average.

Meanwhile monthly service fees on accounts that pay interest hit a new average high of $11.97, up from $11.72 in 2007, according to the report. The minimum account balance that customers need to maintain in order to avoid those fees rose to an average of $3,461.84, about 4% higher than last year.

But there are some measures that customers can take to insulate themselves from paying the higher fees.

"Although fees themselves are moving higher, consumers can completely avoid these fees with just a little bit of effort," said McBride.

ATM fees: When using an out-of-network machine, customers usually pay ATM fees to both their own bank and the one that owns the ATM. At current average rates that amounts to $3.43. So withdrawing $30 or $40 dollars from an out-of-network ATM could result in charges equivalent to 9%.

"That's the type of financial habit that can put you in the poor house," said McBride. To avoid those fees, customers should stick to using ATMs that belong to their own bank, he said.

Online banks may also be worth investigating, McBride said, since some have ATM fee reimbursement programs for frequent users.

Bounced check fees: To avoid fees for bounced checks, customers should keep their checkbooks balanced, and regularly check their account balance online, according to Bankrate.com.

Customers should also get overdraft protection from their bank connected to a savings account, said McBride.

Maintenance fees: Customers might want to pass on the interest, and open a non-interest checking account. While maintenance fees and the minimum balance required to avoid those fees has risen, the fees on checking accounts that don't pay interest actually fell in the last year, according to Bankrate.

Monthly service fees hit an all-time low of $1.93 on average, the study showed. Minimum balances also sank to an average of $109.26, down from $155.49 last year.

Most bank customers are better off going with a checking account that doesn't pay interest, since the ones that do often pay very little, according to McBride. That way customers can maintain a lower balance and put the rest into a high-yield savings account where it can earn greater interest.

Bankrate.com surveyed interest-bearing and non-interest-bearing checking accounts at 249 banks and thrifts in the largest 25 metro areas, which amounted to 247 interest accounts and 226 non-interest accounts.