Checking study: Bank fees still rising
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There is some good news on the ATM-fee front, however. The fee banks charge their own customers for using another bank's ATM dropped off notably since the last survey, with the average falling from $1.37 to $1.29. In contrast to the pervasive ATM surcharges, the prevalence of banks charging their own customers for using other banks' ATMs has plummeted from 89 percent one year ago to a new low of 81 percent today.

Again, Washington Mutual is leading the charge, introducing a free checking account that does not charge for withdrawals from other banks' ATMs. This softens the blow for consumers accustomed to encountering two fees when using another bank's ATM. However, shop carefully as this consumer-friendly policy remains a rare find at banks and even then, only pertains to certain account offerings, not all accounts offered by those banks.

It is important to find an account that meets your needs, even from the perspective of ATM fees. Even with a more permissible fee policy for customers that use nonbank ATMs, the sting of ATM surcharges can still make withdrawals from other banks' ATMs a costly endeavor.

So just how costly can ATM transactions be if visiting another bank's ATM? Using some General Accounting Office data, Bankrate.com estimates American consumers will pay a total of $4.2 billion in fees for nonbank ATM withdrawals in 2006. And this is just for actual withdrawals, not for balance inquiries at ATMs that may result in a fee even if no transaction takes place.

However, the total cost estimate is actually down slightly from the 2005 estimate of $4.3 billion, with the good news of fewer charges by your bank outweighing the higher fees paid by nonaccount holders.

The easiest, and most obvious, way to avoid ATM fees is to manage your withdrawals so that you only make withdrawals from your own bank's ATMs. But let's face it, that just isn't practical 100 percent of the time. Fortunately, there are backup plans, such as getting cash back during a point-of-sale transaction when using a debit card. If you are a customer of a smaller bank or credit union with a very limited ATM network, investigate whether they belong to a surcharge-free alliance that permits use of any member ATM without additional fees.

Internet bank instead?
Is a checking account at an Internet bank a suitable alternative to the fees and balance requirements of traditional banks? If your heart is set on an interest checking account, perhaps so.

It will take a larger initial balance to earn interest at an online bank, $605 compared to the nearly $430 prevailing at brick-and-mortar banks. But the hurdles become easier to clear after that. The average balance required to avoid fees on interest checking accounts is only half as bad at Internet banks, $1,250 versus the $2,465 required at traditional banks. Even the average monthly service fee is approximately half, running $5.50 at Internet banks versus $10.85 at traditional banks.

In exchange, you'll be able to sink your teeth into higher interest earnings. The average yield at Internet banks is 1.96 percent, dwarfing the 0.32 percent at traditional banks. However, even this return is not enough to warrant maintaining a large balance, as the 1.96 percent yield trails the current inflation rate of 3.6 percent.

For highlights of the checking survey, see the related charts.