Pesky bank fees aren’t just creeping up -- they’re attacking from all sides. Banks impose 49 different fees, on average, according to the Pew Charitable Trusts. Getting paper statements in the mail will cost you $1 to $2 a month; seeing a teller could result in a $9 fee; and maintaining a checking account without meeting deposit, balance or usage requirements could cost as much as $30 per month. Earning interest on a checking account often requires a hefty minimum balance, and yields on certificates of deposit and money market deposit accounts are minuscule.
Ironically, a big reason for the fee explosion is federal legislation designed to protect consumers from excessive fees and misleading practices. The Credit Card Accountability, Responsibility and Disclosure Act and a rule that requires customers to opt in to overdraft services have reduced revenue, and banks now lose an average of $174 per year on each checking account, says Mike Moebs, of Moebs Services, an economic-research firm. And banks’ coffers will also be hit by a new regulation that prevents banks with assets of $10 billion or more from charging merchants more than 21 cents each time a customer swipes a debit card (some banks will also get an allowance for fraud protection and loss).
Fortunately, free and high-interest checking accounts haven’t disappeared, and some banks will reimburse ATM fees no matter where you go.
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Free checking. In 2009, 76% of banks offered free checking, but only 65% did in 2010, according to a recent Bankrate.com survey. To qualify for free checking at most banks, you’ll have to meet stiffer requirements. For example, customers of Citibank and JPMorgan Chase must have an average monthly balance of about $1,500 or keep a minimum total of $5,000 in the bank in various accounts.
One option is to cut the frills and sign up for “self service” accounts. With Bank of America’s eBanking account, for instance, you avoid monthly fees if you elect to receive online statements and make deposits and withdrawals online or by ATM. With Citibank’s Basic Checking you can visit a teller, but to avoid fees you must conduct five of seven transactions -- such as direct deposits, ATM withdrawals and debit card purchases -- each month.
Anyone can open a no-fee checking account with just $25 at USAA Federal Savings Bank. The account has no minimum-balance and allows you ten free ATM withdrawals per month. Plus, it reimburses up to $15 of other banks’ fees each month. Some regional banks are also offering deals. Huntington National Bank, in the Midwest, recently introduced a free, no-strings-attached checking account called Asterisk-Free Checking. It has no minimum-balance requirement and no monthly service fee, and it offers a 24-hour grace period for overdrafts. (You can open an account if you live in one of the six states that Huntington serves.) In other regions, check out PNC’s Virtual Wallet, M&T’s Totally Free Checking or Zions Bank’s Free Checking.
Community banks and credit unions routinely offer free accounts with no minimum balance, no service charge and unlimited check-writing. You can find a credit union near you at www.asmarterchoice.org.
Interest checking with fewer strings. Likewise, unless you agree to no-frills banking or keep a high minimum balance in the bank, it’s almost impossible to find a checking account paying much more than 1% interest. For example, JPMorgan Chase requires an average daily balance of $15,000 in linked deposits or investments for its Premier Plus account just to earn 0.01% interest.
A few community banks and credit unions -- including Capital Bank, in North Carolina, and Consumers Credit Union, in Illinois -- offer accounts paying as much as 4% to anyone in the U.S., but certain requirements apply: You must make ten to 12 debit card purchases each month (ATM transactions don’t count); arrange for one automatic payment or direct deposit a month; and receive your account statement electronically. Visit www.checkingfinder.com to find an account for which you qualify.
Other options: Incrediblebank.com’s Incredible Checking account is open to anyone. It pays 1.21% and requires a $1,000 minimum to open the account. Ally Bank offers a tiered rate of up to 0.9% on its free interest checking account, which you can open with $1. (Ally Bank also has a debit-card rewards program.)
Free ATMs. It now costs almost $4, on average, to withdraw cash from an ATM that isn’t in your bank’s network. But it’s not hard to avoid these fees. Citibank account holders have a network of 28,000 ATMs, in the U.S. and 40 other countries, from which they can withdraw cash surcharge-free. If you have an account at Bank of America, you won’t be charged at ATMs belonging to certain banks in Europe, Australia and New Zealand. Many credit unions belong to the surcharge-free, 28,000-ATM CO-OP Financial Services Network, which has cash machines at Costco and 7-Eleven stores as well as credit unions.
The Allpoint network includes 35,000 surcharge-free ATMs in the U.S. Or you may have access to the MoneyPass network, which has almost 20,000 surcharge-free ATMs in banks and retail stores such as Dunkin’ Donuts. Look on your debit card for the logo of the network in which your bank or credit union participates.
Savings with oomph. With interest rates on savings barely crossing the 2% threshold, shopping for the best rates is more important than ever. The top one-year CD from Aurora Bank is yielding 1.21% with a $1,000 minimum. Bank of Internet offers the highest-yielding two-year CD, at 1.50%; it also requires a minimum of $1,000. First Internet Bank of Indiana offers the highest-yielding five-year CD, but it has a stiff early-redemption penalty of nearly a year’s interest. You’ll need $1,000; it pays 2.40%. If you prefer immediate access to your money, money market deposit accounts and traditional savings accounts are better options. Flagstar Direct’s no-fee MMDA pays you 1.11%, or you can earn 1.16% in an online savings account at SFGI Direct. For more top-yielding accounts, see 6 Best Credit Cards for Students.
Healthy relationship banking. If you’re willing to keep a lot of money and a number of accounts under one roof, the big banks are willing to drop fees and add perks to reel you in.
PNC’s Virtual Wallet With Performance Spend combines two checking accounts (one for spending and one for short-term savings) with a long-term savings account; interest rates on the accounts depend on their balances. The $10 monthly service fee is waived if you have monthly direct deposits of $2,000 or more, keep a total average balance of $1,500 in your checking accounts or have a $10,000 combined average monthly balance in various accounts.
Wells Fargo’s PMA Package is an all-inclusive money management and brokerage account that entitles you to an interest-bearing checking account (rates depend on the balance), free checks, higher interest rates on certificates of deposit and IRAs included in the package, and 100 commission-free online trades per year for the brokerage account. If the balance among all qualifying accounts is $25,000 or more, a $30 monthly service fee is waived.
Some institutions that you don’t necessarily equate with banking offer fee-free checking. The Schwab Bank High Yield Investor Checking account is automatically linked to a Schwab One brokerage account, which has no monthly service charges and no account minimum. It features unlimited ATM fee reimbursements and free checks. Fidelity offers its free mySmart Cash Account to Fidelity customers. It has no minimum-balance requirements, reimburses all ATM fees and offers free checks.