Balance requirements on interest accounts
Not only is this fee steep, it's tough to avoid. The balance required to avoid the monthly service fee is an eye-popping $3,316.60, up 25 percent compared to last year's survey. The soaring balance requirement is nothing new, having hit a record high for three consecutive surveys. The move higher was driven by the 31 banks increasing the balance requirement against the nine banks that decreased it.
Imagine keeping more than $3,300 in a low-yielding account just to avoid fees! Even if you had that kind of money in your checking account, is it worth it? Not at a yield of 0.32 percent. Keeping $3,316.60 in an interest-bearing account at a yield of 0.32 percent earns just $10.61 in interest for the whole year! Slip up just once, and one monthly fee of $11.72 more than wipes that out. Not to mention, the interest earnings are taxable but the fees aren't deductible. Bottom line, an interest checking account requires a whole lot of sacrifice on your part, without delivering much in return.
What do we mean by sacrifice? The
same $3,316.60 deposited into a high-yielding
money market or savings account at 5 percent would
earn more than $160 in interest over the course
of a year. Keeping that money in a low-yielding
checking account means leaving more than $150
in interest earnings on the table annually.
In order to get your excess cash into a higher-yielding but still readily available money market or savings account, you'll need to find a checking account without a balance requirement.
See minimum balance details.
Save with noninterest
Noninterest accounts are just the place to look.
The average balance requirement and monthly service
fee for noninterest accounts each hit a record
low in this survey. The average monthly service
fee is $2.26, down from $2.52 one year ago, and
the average balance required to avoid that fee
is just $155.49.
But monthly service fees and balance
requirements are the exception rather than the
rule on noninterest accounts. A hallmark of free
checking accounts is the lack of monthly service
fees and balance requirements -- and 68 percent
of the noninterest accounts surveyed meet that
description. If you're on the hunt for a free
checking account, noninterest accounts are the
place to look.