More financial institutions have done away with free checking accounts or have raised the minimum-balance requirements to avoid the charges, and the fees they are applying to accounts are up this year, new research shows.
Just 45% of noninterest checking accounts are free, down from 65% that were last year and from the peak of 76% just two years ago, according to Bankrate.com’s 2011 Checking Study.
For its research, Bankrate surveyed 10 banks and thrifts in each of 25 large U.S. markets between Aug. 1 and 12. This included one interest and one noninterest account at 247 institutions that offer checking accounts. In total, the survey covered 243 interest and 238 noninterest accounts.
Greg McBride, Bankrate’s senior financial analyst, was not surprised by the findings but emphasized there are ways to avoid the fees. “The decline of free checking is in full swing. However, savvy consumers can take advantage of an increasing amount of fee waivers, most commonly with direct deposit,” he said in a Sept. 26 press release. “Ninety-two percent of noninterest accounts are either free or can become free.”
Large banks have led the charge to eliminate free checking since the Federal Reserve proposed, then later approved, rules that will cap the revenues they earn from debit interchange fees. But more than 70% of smaller community and regional banks still offer fee-free checking, according to a different survey last month from Moebs Services (
Bankers at smaller institutions say they cannot afford to alienate their customers by adding fees to deposit accounts
Both interest and noninterest checking accounts posted big increases in monthly service fees and the balances required to avoid them. On interest accounts, the average monthly fee is $14.15, up 8.5% from $13.04 last year. The balance required to avoid the fee jumped 43.9%, to $5,587 from $3,883, though these balances are increasingly permitted to be held in other accounts and not strictly in the checking account, according to the release.
On noninterest accounts, the sharp decline in free accounts means 60% more accounts now carry fees and balance requirements. The average monthly fee is $4.37, up 76% from $2.49 last year, and the balance required to avoid it is $585, more than double the $249 from one year ago, the release notes.
Debit card fees remain rare, despite recently publicized cases. Only 4% of accounts charge a point-of-sale fee when using a debit card, and less than 2% charge a monthly or annual fee to have a debit card, according to Bankrate.
The average ATM surcharge hit a new high for the seventh consecutive year, at $2.40, up 3% from $2.33 last year. The average foreign fee one’s own financial institution charge customers for going outside the network is unchanged from last year at $1.41, Bankrate reports.
The city with the highest ATM fees is Denver, averaging $2.75, followed by San Diego at $2.70 (see chart). The city with the lowest average ATM fee is Cleveland at $2.06, followed by Minneapolis at $2.15.
The average overdraft fee set another record of $30.83, up 1.2% from $30.47 last year. This keeps intact a streak of increases dating back to Bankrate’s first annual survey in 1998. The city with the highest average overdraft fee is Denver at $33.50, followed by Miami at $33.05. The city with the lowest average overdraft fee is San Francisco at $27.59, followed by Chicago at $28.80.
