I don’t know about you, but when I was in college, the potential to get some free pens, pizza or another ill-fitting branded T-shirt was a good reason to sign up for just about anything. So when Chase bank set up a table outside my freshman dorm promising $50 in exchange for opening a checking out, I naturally jumped at the chance.
I wasn’t thinking much beyond the prospect of an extra $50 in my pocket or considering my long term financial needs. After all, I was only 18 and didn’t have any money, outside of the pittance I’d earned over the summer as a camp counselor. I didn’t take the time to read the fine print that detailed the monthly maintenance charges that would soon eat up my entire sign up bonus. I was late enough to class as it was.
It wasn’t long after that fateful day that I learned the inescapable reality of “terms and conditions.” In my case, that included $3 ATM fees just to get access to my own money, $2 a month to receive paper statements and another $15 for checks. I didn’t have enough money to afford to watch it slowly get eaten away in fees.
Last August, an analysis of 6,000 banks by the Wall Street Journal found that at the 25 institutions with the highest average fees, the average account was charged with more than $383 in fees annually. They also found 160 banks where the average account was charged fees of less than $5 a year. That’s a difference of $378! In other words, it pays to shop around.
Most people don’t associate banks with deals or discounts. Many operate under assumption that fees for basic bank services are just a fact of life, but this study illustrates quite clearly how a little smart shopping, even when it comes to your bank, can lead to a savings of hundreds of dollars each and every year. So what should you be looking for in your banking experience to make sure you’re getting the best deal?
Free Checking. Only four percent of interest checking accounts are free according to Bankrate’s 2014 Checking Survey, but 97 percent of accounts can be free if the consumer meets certain conditions, such as maintaining a minimum balance, setting up direct deposit and using e-statements Online only banks generally offer the best of both worlds; high yields and minimal (if any) fine print fees or minimums.
Because they don’t have to pay for expensive real estate, tellers, and other costs associated with traditional brick and mortar institutions, online only banks are able to pass along those savings to customers in the form of higher interest and fewer fees. Anyone looking for a better deal from their bank can start be rethinking their brick and mortar loyalty.
ATM Fees. Bankrate’s 2014 Checking Survey also found that the average surcharge banks charge non-customers using their ATMs increased for the 10th year in a row to $2.77. Additionally, the average fee banks charged their own customers for going to an out of network ATM also reached a new high of $1.58.
That means any time you’re in a pinch and can’t find an ATM within your network, you could be paying $4.35 just to access your money. The good news is, ATM fees are avoidable. Getting around those nasty surcharges doesn’t have to come at the cost of running all over town to find an in-network ATM either. Online only banks like Ally and Charles Schwab typically offer major perks like ATM reimbursements along with their fee free checking accounts.
Just one ATM withdrawal per month, at an average of $4.35, can cost you over $50 each year. With the right account however, you can keep that money where you need it — in the bank.
Overdraft Fees. In a 2014 survey, Magnify Money found that 33 percent of Americans had gone into overdraft at least once in the previous year. Whether accidentally or not, the fees associated with overdraft make it one of the most expensive forms of short-term borrowing. Some banks however, make the financial pain of overdraft far worse than others.
Magnify Money conducted an analysis of the total cost of a hypothetical overdraft of $100 paid back in 10 days. The worst-case scenario was at Citizen’s Bank where the total cost of “borrowing” $100 for 10 days was $83.93. The best-case scenario was at Ally Bank where the same overdraft and payback period only cost $9. That difference is nothing to scoff at.
Compound these fine print fees over the course of a lifetime and you could save yourself thousands by choosing a bank that reimburses, caps or waives fees altogether.
The alternatives for better banking exist just as much as circulars for grocery stores and promo codes for online shopping. Don’t miss out on potential savings just because you failed to shop around. And don’t worry, it’s never too late to open a new account!
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How to Save Money With Better Banking originally appeared on usnews.com
