Are Monthly Checking Account Fees Really So Bad?

Just a few years ago, banks were actually paying customers to sign up for new checking accounts. They were paying existing customers for referring friends and relatives. Meanwhile, existing bank customers enjoyed checking accounts and most of the benefits at no monthly charge. All that's changed.

Sign-up perks are a distant memory and the number of free checking accounts is dwindling with less than 40% of banks offering a completely free checking account, according to a Bankrate.com survey. Many consumers, appalled at the introduction of fees, are taking their money to credit unions: 72% of the largest credit unions still have free checking account.

Obviously, we consumers don’t want to pay for something that used to be free, especially when there's no (perceived) additional benefit. The average monthly service account fee is just $5.48. Is that too much to pay? What kinds of things are we getting from banks in exchange for that fee?

A few years ago, online capabilities were limited and, in some cases, didn’t exist at all. Now, you can use online bill pay to nearly all your bills and sometimes even people, too. Some bills are paid electronically within just a day or two. Bills paid online via check take a little longer to reach the biller, but you didn’t have to write a check, purchase an envelope and stamp, or take a trip to the post office to mail the envelope. Online bill pay itself saves a few dollars each month.

Many banks also give you the ability to deposit checks online, too. Just scan the front and back of your endorsed check, upload it to your bank, and the check clears as normal. Some banks even let you deposit a check by simply taking a picture of it. You've saved yourself a trip to the bank.

Mobile banking is another convenience. If you have a smartphone, you can download the bank’s app and use it to check your balance, pay bills, transfer money, or view your statement.

Your checking account includes access to the bank's ATMs. You'll probably have to pay to use another bank’s ATM, but bigger banks often have more ATMs available, hopefully eliminating the need to use out-of-network ATMs.

Email and text message alerts are another benefit that can, at a minimum, help you avoid overdrafting your account and thus save you at least $39 and the hassle of trying to clear up an overdraft.

Some checking accounts may charge a monthly higher fee for other perks like:

• Limited or no fees on out-of-network ATM transactions
• Rewards on debit card purchases
• Reduced or no overdraft protection fees
• Discount on checks
• Free money orders and cashiers check
• Interest-earned on your balance
• Discount on Safe Deposit Box rentals

Monthly maintenance fee can often be waived, depending on your bank, by carrying a minimum average balance, having a minimum direct deposit, getting a credit card or other account with the bank, or making an automatic transfer to a savings account each month. Transaction-based fees will still apply. This includes fees for out-of-network ATM withdrawals, returned deposits, stop payment, and wire transfers.

Of course, some fees are undeniably ridiculous, like the returned mail fee which you’re charged if your bank statement or other mail is returned. Banks may also charge a fee if you redeem your debit card rewards.

If you’re fed up with your checking account fee, you can always switch to a bank that doesn’t charge fees. However, you may be surprised to find that there are other inconveniences. For example, a local credit union may have a limited number of ATMs or branches causing you to take extra steps to withdraw cash or do other teller-based transactions.

And banks have said that accounts with smaller balances, i.e. below $100,000, are unprofitable. It seems that monthly maintenance fees on bank accounts is the new normal. Many consumers are outraged at having to pay for access to their own money, but banking, to a certain extent, is optional.

Unfortunately, free checking may continue to disappear until the economy changes. Consumers have to decide whether it’s worth it to pay the fee, do what it takes to avoid the fee, or just move to a bank that doesn’t charge a fee at all.