Which checking account fees are most important?

October 25, 2012

| MoneyRates.com Senior Financial Analyst, CFA

Q: I'm trying to compare checking account fees, but it seems like apples and oranges -- different types of fees in different amounts. What fees are most important? Also, doesn't anybody have free checking anymore?

A: It might be easier to answer your second question first. When people refer to "free checking," they usually mean an account that has no monthly maintenance fee. That doesn't mean the account won't have various other fees, such as ATM fees and overdraft fees. Depending on how you use the account, those fees can be more significant than the monthly maintenance fees.

That leads into the first part of your question: Which fees are most important? Looking at some typical fee levels can help illustrate why the answer to that depends on your account habits.

According to the latest MoneyRates.com Checking Account Fee Survey, the average monthly maintenance fee among accounts that charge such fees is $12.08. The average fee for using an ATM outside of your own bank's network is $1.28, and the average overdraft fee $29.83.

Lining these fees up side-by-side, the overdraft fee is clearly the largest, so does that means it is most important? This is where your usage of the account comes in.

An important thing to understand about these fees is that a monthly maintenance fee will be charged every month, no matter how you use the account, while overdraft fees and ATM fees can be avoided. So, all things being equal, a monthly maintenance fee should be the most important fee to compare when choosing a checking account.

However, if you habitually overdraft your account, then overdraft fees become more important. Similarly, if you travel a great deal and find you frequently use an ATM outside of your bank's network, then you'll want to pay more attention to ATM fees when choosing a checking account.

Ideally, though, you should try to avoid ATM and overdraft fees. When choosing a bank, look for one that has an ATM network that matches well with your regular areas of travel. As for overdraft fees, keeping up-to-date and accurate records should help you avoid overdrafts. Remember, you have the right to opt out of overdraft protection if you want to force yourself to develop good record-keeping habits.

Getting back to the monthly maintenance fee, the most recent MoneyRates fee survey found that just over one-third of all checking accounts have no monthly fees. Many other accounts will waive the fee if you maintain a specified minimum balance.

In summary, all fees should be taken into account when choosing a checking account, though with smart shopping and careful banking habits, you can avoid paying all forms of checking account fees.

Got a financial question about money, banking, or investing? MoneyRates.com invites you to submit your questions to its "Ask the Expert" feature. Just go to the MoneyRates.com home page and look for the "Ask the Expert" box on the lower left.

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