| Checking
survey: ATM fees hit a record high | | |
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Electronic transactions now exceed the number of checks
written each year. If you're like many people who have jumped on
board the debit card bandwagon, you can use that card to get cash
back with your next point-of-sale purchase. It is important to check
with your bank to make sure a point-of-sale fee is not assessed
for certain debit transactions, such as entering a PIN instead of
doing a signature-based transaction. But even in a pinch, this fee
that typically runs 50 cents beats paying $3 or more in ATM withdrawal
fees.
The cardinal rule for debit card users is to keep
track of those purchases, whether you hang on to the receipts or
monitor your account online. Otherwise you might find yourself paying
more of those bounced-check fees.
Whether or not you diligently keep your check register
current, signing up for overdraft protection is still the easiest
and cheapest way to avoid bounced check fees. While you might incur
a small transaction fee whenever the overdraft protection kicks
in, it pales in comparison to the bounced check fees that can exceed
$35 and any similar fees that the payee may tack on.
Finding another bucket
The fact that interest checking accounts charge high fees, require
gargantuan balances to avoid those fees and offer little in the
form of interest earnings is well-established. What about Internet
banks? While Internet banks offer better yields, currently paying
an average of 1.7 percent, even they require a similarly large balance
to avoid fees.
Regardless of whether you're looking
at online banks or your local bank, the yields on interest checking accounts fall
short of what is available in a high-yield savings or money market account.
Rather than strand this money in a checking account
to avoid fees and kid yourself into thinking the yield is the best
return on your money, look for a checking account without a balance
requirement. Then instead of maintaining a higher-than-necessary
balance in your checking account, move the excess money into a higher-yielding
savings or money market account. You'll still have the protection
of Federal Deposit Insurance Corp. insurance and access to the money
when needed, but you will earn a better return. Currently, savings
and money market accounts offer yields of 4 percent or more regardless
of your account balance.
But that still brings you back to the issue of what
to look for in a checking account. You can use Bankrate's search
to compare
checking rates.
Noninterest checking accounts carry much lower fees
and balance requirements than interest accounts. The average monthly
service fee on a noninterest account is $3, compared to nearly $11
on an interest account, and avoiding that fee requires maintaining
a very reasonable balance of $267.78, on average.
But you don't want
to replace that leaky bucket with one that just has a smaller hole in the bottom.
You want a shiny new bucket. In other words, don't settle for lower fees and balance
requirements when what you really want is no fees and balance requirements.
Noninterest accounts maintain a decided advantage.
Of the 458 accounts surveyed
in the 25 largest markets, there were 134 accounts that had neither
a balance requirement nor a monthly service fee. Noninterest checking
accounted for 128 of these, while only six were interest accounts.
While Bankrate.com no longer gathers data on
per-check charges, historically about 20 percent of noninterest
accounts and 10 percent of interest accounts assessed such fees.
Using those same averages as a reference point, we can estimate
that approximately 102 of the noninterest accounts and five of the
interest accounts would qualify as free checking accounts. While
a free interest checking account is truly a rare breed, a free noninterest
account is a routine sighting, with an average of four such accounts
available among the 10 largest banks and thrifts in each of the
25 largest markets.
For the highlights of the checking study, see the related
chart.
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