Wednesday, August 1, 2018

Thrifty Thinking: Checking Accounts and Fees

MyBankTracker conducted an ongoing survey throughout 2017* regarding checking account usage with 21,000+ surveyed. Here are the top findings:
  • Americans wasted nearly $3.5 billion* in monthly maintenance fees last year at the top 5 US banks alone
    • That’s at least $289 million* every month at the top 5 US banks
  • 70.6 million US households, nearly 64 percent, had <$1,000 in checking accounts - leading to monthly fees if they don’t use direct deposit
  • 67.7 million US households, 61 percent, don’t use direct deposit, an easy way to avoid monthly fees
  • 41 million US households, 37 percent, had at least one overdraft
    • 7.7 million US households, 7 percent, had 5+ overdrafts
I had a chance to interview CEO, Jason Reposa to learn more. Find out MyBankTracker's best checking account recommendations here.

1. Why do so many people lose money with maintenance fees?

Most often, people aren't paying enough attention. You need to create a budget and make sure every dollar has a purpose. If you see you're losing $10-12 a month on fees, you'll need to correct that by either switching banks or meeting the minimum deposit requirement. Understanding each transaction will provide insight into your spending and you'll catch any fees that you may not realize you're being charged.

Additionally, people have a hard time saving enough money to meet the minimum deposit requirement. If there's no possible way to fix that in the short term, you'll have to look at switching banks to avoid the fee - assuming direct deposit isn't an option.

2. What are some ways to avoid fees on checking accounts?

Monthly maintenance fees: Make sure you have enough to cover the minimum balance requirement. Enable direct deposit, if possible. Alternatively, consider switching to a low-to-no-fee checking account at a local or online bank.

Overdraft fees: At many banks, you can link your savings and checking accounts. This is helpful when, unfortunately, you overdraft your checking account. The bank transfers enough money to cover the withdrawal from your savings account. However, this still typically incurs a fee, but it will likely be substantially less than the $35 charged as a standard overdraft fee. Additionally, and better for your budget, don't spend more money than you have.

ATM fees: Use in-network branches and/or ATM machines. If you have to  go out-of-network, use a bank that reimburses you. Personally, I use two different banks for this purpose. I keep extra "emergency" funds in an online checking account that reimburses me up to $10 a month in ATM fees. However, I will say, I use this account sparingly. Traditionally, online banks have favorable ATM fee reimbursement features.

3. How can people make sure to avoid unnecessary overdrafts?

You have to be mindful of what is actually in your account and the order in which your spending transactions are being debited from your account. It may hurt to look at your account if you don't have much money, but you could do serious damage with overdraft fees if you spend money you don't actually have.

*MyBankTracker conducted an ongoing survey regarding checking account usage during the calendar year of 2017 with 21,186 respondents in the United States
**assuming the average monthly fee is $10.99/month

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