Despite the widespread availability of free checking services, more than a quarter of checking account holders – 27% – pay fees every month.
Those fees add up to an average of $24 a month, or $288 a year, for consumers who don’t use free verification, according to a new Bankrate.com survey. The personal finance website conducted its online survey Dec. 7-12 and included 3,657 adults, 3,069 of whom have checking accounts.
The fees come from routine services or ATM and overdraft fees, the investigation said. The average overdraft fee is $29.80, according to research by Bankrate, while the average shortfall fee is $26.58.
The annual totals might not sound like much, said Sarah Foster, an analyst at Bankrate.com, but can add up to a whopping $5,000 if you stick with your checking account for 17 years, like the average consumer does.
Nixing bank fees is an easy way to free up some extra cash in your budget, especially with high inflation and rising expectations of a recession. Paying these extra costs can stretch consumers’ budgets and make them more vulnerable when a downturn hits.
“It’s just an important and really simple way to make sure you’re not spending more money than you have to,” Foster said.
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Which generations spend the most on verification fees?
Younger people are most vulnerable to paying fees, Bankrate.com’s survey found.
Generation Z, aged 18-26, tops the list, with 46% of this generation’s checking account holders paying monthly fees. This cohort pays about $25 a month, Bankrate.com found.
Next in line are millennials aged 27 to 42, with 42% of account holders paying monthly checking fees, Bankrate.com found. They tend to pay the most compared to other generations, at $28 a month, the study found.
Older cohorts — Gen Xers, aged 43 to 58, and baby boomers, aged 59 to 77 — are less likely to pay checking account fees. That includes just 22% of Gen X and 14% of Baby Boomer checking account holders, who pay $17 and $22 a month, respectively.
More than half of Gen Z – 56% – and Millennials – 52% – say they sacrifice recession preparedness because of the monthly fees they pay. In comparison, 46% of Gen Xers and 35% of Baby Boomers said the same thing.
The monthly fees bring consumers back to goals, including paying off debt, saving for emergencies, or for important goals like buying a home or car, or paying for college or investing money for retirement, the survey found.
Estimate the true cost of your checking account
To know what you’re really paying for your checking account, you should check your bank statements at least monthly, according to Bruce McClary, senior vice president of the National Foundation for Credit Counseling.
Start with the basics – look at your transactions to make sure they’re correct, he said. Then evaluate your transactions and withdrawals as well as any applicable account management fees.
If you feel like you’re being charged in error, you should have a conversation with your bank, McClary said.
Keep in mind that your bank or credit union may be able to make adjustments. If you tell your financial institution about your personal situation, they may be willing to waive certain fees, particularly an initial fee, Foster said.
“There’s no guarantee it’ll work, but it never hurts to reach out,” Foster said.
“Look around for opportunities”
Also, check if there are any fees you can avoid, e.g. by eliminating off-network ATM withdrawals or maintaining a required minimum balance.
Try to find free savings and verification services wherever you can, McClary said.
“Look for opportunities,” McClary said. “If your bank or credit union doesn’t offer them, this could be an opportunity to move your business somewhere else that might be cheaper.”
Opening a new account at another institution can seem tedious, especially when it involves visiting the office and physically moving cash, Foster said. But the savings over time can more than make up for the effort.
“Switching banks can be a pretty onerous step, but it can help you build long-term wealth if it means you don’t have to pay for a service that you can get for free elsewhere,” Foster said.
And if you find you’re not happy with your new account, you can always move your money elsewhere, she said.
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