There are numerous types of bank fees out there, and it seems that more keep popping up every year. I refer to these types of annoying fees as unconscious spending, primarily because most of them are simply removed from your account without any additional action on your part. The most notorious among them are “account maintenance fees”, ATM fees, overdraft fees, and so on. There are others, as well, but this “big three” are the ones that tend to impact us all the most.
So what’s happening now? Well it ‘s not pretty.
According to recent survey by Bankrate.com (an extremely helpful website, by the way), 3 years ago 76% of banks offered some type of free checking account. Today that number has plunged to just 39%.
Monthly account maintenance fees average $5.48 today, and increase of 25% over last year. Over the past 5 years, these fees are up a whopping 142%! And the minimum balance required in order to avoid these fees? That has skyrocketed, as well, and is now at $723, and increase of 23% from last year and up an incredible 365% in just 5 years! Keep in mind that, if you had $500 in a bank that charged you a $5.48 monthly fee, that means you’re spending $65.76 a year to keep your $500 in the bank, and effective rate of 13%. Do you know where you can get a return of 13% on your money? Guess what? Your bank does! And keep in mind that, as long as it’s less that the required minimum balance requirement, that $5.48 fee really doesn’t care if you have $50 or $500 in the bank. It’s coming out of your account every month, regardless.
Here in the U.S., last year we contributed $31.6 billion our banks in the form of overdraft fees. Granted, recent legislation has changed much about overdraft practices over the past two years, yet the most common overdraft charge is now $35.
And I’m not done. ATM fees are now at a record $2.50 per transaction, but in many cases the fee your own bank might add for an out-of-network ATM brings the total to a whopping $4. Oh yeah – that’s $4 to get your own money out of a machine, and it’s the same $4 if you withdraw $100 (effectively 4%) as it is if you withdraw $20 (effectively 20%).
So what can we do about it? To start, we can shop around and determine if we need to make a change in our banking relationships. This can be a huge pain or a minor annoyance, but credit unions are a good alternative for many, and even investment banking companies like Charles Schwab have excellent options.
We used to hear about banks being robbed. I’m not sure who has the mask and gun these days, are you? As Alanis Morissette might ask: Isn’t it ironic?