Monthly Checking Account Maintenance Fees Growing

November 14, 2009

By Lydia Poon | Money Rates Columnist

While checking account overdraft fees have received a great deal of critical attention and have led to proposed legislation curbing their use, new data released by Money Rates show that monthly maintenance fees have grown more quickly than overdraft fees in recent months.

Maintenance Fees on Checking Accounts Growing

In a survey commissioned by the State of New York Banking Department, Money Rates researched offerings provided by banks doing business in New York, reporting the fees charged for consumer checking account and ATM services. In the third quarter of 2009, overdraft fees averaged $29.56 and monthly fees averaged $6.63 per month. Although the average monthly maintenance fee was smaller in comparison, the growth of monthly maintenance fees was 15.3% between the first and third quarters of 2009--many times the 2.8% growth rate of overdraft fees in the same period.

"The proposed legislation curbing overdraft fees is well-intentioned but misguided," says Money Rates columnist Richard Barrington. "Most bank customers realize they can avoid overdraft fees by not overdrafting their accounts. Those maintenance fees, on the other hand, are going to be there month after month. The only way to squeeze those down is to shop around for accounts with little or no monthly fees."

How Monthly Fees Reduce Your Bank Rate

Monthly maintenance fees can have a large effect on your checking account balance. The average maintenance fee from the survey, $6.63 per month, would cost a bank customer $79.56 in a year. On a $500 average checking account balance, these fees would translate into a nearly 16% annual loss just for holding the account.

Why might maintenance fees be increasing so much faster than overdraft fees? Barrington suggests that the faster growth rate of monthly fees may show that banks are already adjusting to the scrutiny on overdraft fees. "It's like squeezing one end of a balloon--you'll just put the stress somewhere else. If overdraft fees are cut back, banks will have to make it up elsewhere, such as in higher monthly fees or by offering lower interest rates on savings accounts. Making new rules will just lead to different tactics by the banks."

Barrington advises smart shopping and adjusting account behavior so you don't incur unnecessary fees. "In this case, consumer activism can be much more effective than legislation."

Using Money Rates to compare interest rates for checking accounts, savings accounts, CDs, and money market accounts, you can identify banks that are offering the best rates but don't have correspondingly high maintenance fees.

Money Rates Continuing to Monitor Fee Trends

The survey data studied by Money Rates was based on regional and national banks doing business in New York state but is believed to be indicative of fee trends nationwide. The results of the survey for the last quarter can be found at the New York State Banking Department website. The next survey of New York banks will be conducted in December 2009 for Q4 data. Money Rates will release an updated analysis of this ongoing survey semi-annually.

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