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Checking study: Bank fees still rising

Banking fees, balance requirements for checking accounts and ATM costs continue to rise while interest earnings on checking accounts do not, according to a Bankrate.com survey.

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Bankrate.com's semiannual checking survey looks at the checking accounts and corresponding ATM fees by the largest banks and thrifts in each of the 25 largest markets nationally. Bankrate.com surveyed 248 banks offering checking accounts, looking at 462 accounts -- 247 interest and 215 noninterest. Bankrate.com then compared them to a sampling of checking accounts available at Internet banks.

The key findings of the study are:

  • Getting whacked with bounced-check fees can leave quite a welt on your wallet. The average bounced-check fee is $27.04, and with more banks using a tiered structure, the cost can quickly escalate.
  • ATM surcharges hit a new high and are more prevalent than ever. The fee that banks charge to nonaccount holders now averages $1.60, with 98 percent of banks owning ATMs charging a fee.
  • The average balance requirement on interest-checking accounts hit a new high of $2,465. And you're not getting much in return, as interest-checking yields remain in the cellar.

Here is what Bankrate.com found in its latest survey, what it means to you and some solutions to save you dough.

Bounced-check fees
Bouncing a check results in a punitive fee from your bank, and the punishment is growing increasingly harsh. The average bounced-check fee increased from $26.90 to $27.04 since the fall survey, the second-highest ever recorded following the $27.13 average of one year ago.

The average bounced-check fee has increased with remarkable consistency since the twice-annual survey commenced in 1998. The first survey, in fall 1998, carried an average bounced-check fee of $21.57 and has increased about 25 percent since. Only twice in that time has the average fee failed to increase from one study to the next. Even Tiger Woods isn't that consistent.

The increase in the average fee this time around is no fluke. The number of banks increasing bounced-check fees outnumbered those cutting fees almost 2-to-1. There were 39 increases but just 19 decreases.

But as Paul Harvey would say, "And now, the rest of the story." The cost of bounced checks doesn't stop after the first occurrence. In fact, it gets worse. Why? Increasingly, banks are employing a tiered fee structure for bounced checks. Under the tiered structure, the cost of bouncing a check can increase as additional checks fail to clear.

For example, since the last study, Wachovia Bank has introduced a tiered fee structure for bounced checks. The first check will cost $25, with the fee increasing to $30 each for the second, third and fourth checks, and anything beyond that is $35 each. Furthermore, Wachovia's policy is typical of some other large banks, such as Bank of America and U.S. Bank, in that, when charging the fees, it counts all the occurrences during the past 12 months.

So while the cost of one bounced check at Wachovia decreased to $25 from the previous survey, the cost of bouncing more than one check or repeatedly overdrawing the account during a 12-month period is now higher. The account holder that rarely bounces checks may catch a break under the tiered structure, while more routine slip-ups come at a higher price.

So, how best to protect yourself from the ever-escalating cost of bounced checks? The first line of defense is to sign up for overdraft protection, preferably by linking a savings account to your checking account. Also, be particularly diligent about recording all of your transactions, especially if you favor the use of a debit card or have regular monthly payments automatically withdrawn from your account.

Next: " ... interest checking accounts are, by and large, a lousy deal."
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