Overdraft fees hit all-time high, ATM fees down
Which checking accounts are more likely to waive monthly fees with just a direct deposit?
Dimon on Warren exchange, overdraft fees
JPMorgan Chase CEO Jamie Dimon, while discussing the testy exchange with Sen. Elizabeth Warren during a Senate Banking Committee hearing, argued that there's a huge benefit to overdraft fees.
More than half of Americans currently face financial struggles, living paycheck-to-paycheck, trying to make ends meet.
While ATM fees are down from 2020, overdraft or non-sufficient funds charges are up from last year, at an all-time high.
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According to Bankrate.com’s annual Checking Account and ATM Fee study, overdraft (NSF) charges have jumped to a new record high of $33.58, compared to $33.47 last year.
This year marks the third year in a row to see a rise in overdraft fees, but these fees vary by metro area.
Philadelphia was found to have the highest overdraft fees of $35.70, followed by Baltimore, $35.61, and Houston, $35.17. On the other hand, the city with the lowest overdraft fees is Cincinnati, $30.42, followed by Los Angeles, $31.00, and St. Louis, $31.60.
It is important to understand how to avoid these unwanted fees, as you might trigger one without even knowing.
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Bankrate’s Greg McBride, CFA advises, "before initiating transactions, use your bank’s app to check your available account balance to avoid overdrafts."
For example, a check you deposited yesterday could be showing up in your total balance, but not actually be available for immediate withdrawal yet. To avoid this, "set up a link between your checking account and savings account so you automatically cover any shortfall and avoid overdrafts," McBride explained.
"Also, sign up for email or text alerts that let you know when your balance gets below a designated threshold. Be proactive to avoid overdrafts as inadvertent slip-ups do occur," he continued.
Bankrate also looked at both interest and non-interest checking accounts, as well as their associated fees.
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It found the average monthly service fee for interest checking accounts to be up 5.5% from last year, at $16.35, while the average balance required to avoid the monthly fee spiked 31% from last year. This year, the average balance stands at a record high of $9,896.81, compared to last year’s record high of $7,550.42.
Almost 80%of interest checking accounts require some form of balance requirement. Interestingly, only 12% of interest checking accounts will waive the fee based on direct deposit, which is down from last year’s 21%.
Additionally, less than 8% of these accounts are free of stipulation, with the average yield this year falling to a new record low of .03%.
In terms of non-interest checking accounts, they differ in that they do not have a monthly fee or balance requirement. Instead, they have the highest percentage of free accounts, which has increased for the sixth year in a row.
These accounts average monthly fees of $5.08, down 3.6% from last year and the lowest since 2011. The average balance requirement to avoid fees is at a 10-year low, down 15% from last year.
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Additionally, about half of accounts will actually waive the monthly fee with direct deposit, account balance, transaction activity or a combination of these.
"If you’re paying a monthly fee for your checking account or maintaining an excess balance to avoid a fee, look for one of the many accounts that are free, or can become free with nothing more than direct deposit," McBride said.
About 99% of non-interest accounts are free or can become free, with 41% of accounts waiving the monthly fee based only on direct deposit.
"48% of non-interest accounts are free, but just 8% of interest earning accounts are free. Skip the high fees, high balance requirements and low yields of interest-bearing checking in favor of free accounts that have no fees or balance requirements," McBride continued.
Lastly, ATM fees were also included in the study, finding the average ATM surcharge, the fee imposed by the ATM owner on a non-customer making a withdrawal, to remain the same as last year at $3.08.
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The average fee charged by banks when their own customer goes outside the network fell for the fourth year in a row to $1.51, which is a 10-year low. This could be due to the fact that more and more accounts are permitting free out-of-network withdrawals.
If combining the two fees, the average total cost of an out-of-network ATM withdrawal is down for the second year in a row, at $4.59.
Similar to overdraft fees, ATM fees vary by area.
Atlanta was found to be the city with the highest average ATM fee of $5.23, followed by Phoenix, $5.17, and Cleveland, $5.13. In contrast, Los Angeles, $3.90, Seattle, $4.12, and Chicago, $4.15, were found to have the lowest.