Would you leave bank over checking fees?

If your bank or financial institution raised its fees on checking accounts, would you consider switching to a different provider?
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Fees for financial services are multiplying like rabbits, and consumers are fed up. Seventy-two percent of Americans say they would consider switching banks if their financial institution raised checking account fees, according to Bankrate’s September Financial Security Index.

Only 22 percent of those surveyed say they would not move to another checking account provider because of increased checking fees.

Income and education seemed to have some influence over bank-fee ire. Eighty-two percent of those earning more than $75,000 per year say they would switch, as opposed to 67 percent of people with yearly incomes of less than $30,000. Eighty-one percent of college graduates say they would consider switching, while 64 percent of people with a high school education or less say they would think about it.

Location may play a role as well: Of those in rural areas, 63 percent would be angry enough to switch banks compared to 74 percent of urbanites.

For consumers, online banking is a mixed blessing. While the convenience makes paying bills painless, consumers find themselves stuck as a result of all of those linked accounts, automated deposits and debits. And banks know it.

“On the bright side, I have never seen so many people who wanted to change banks and have never in 20-plus years of doing this seen websites and campaigns encouraging it — never,” says Ed Mierzwinski, federal consumer program director and senior fellow at U.S. Public Interest Research Group, a consumer advocacy organization.

Switching: Easier said than done

If checking fees have you seeing red, here are a few tips for switching your account.

First, shop around. All banks and credit unions are not equal. Explore regional banks, small community banks and credit unions to compare fees with the big guys. Fees are typically lower at smaller banks and credit unions — some still have free checking.

“It’s fair to say that the fees are going up primarily at the big banks. The megabanks have a business model that is more complex, and they are not really making money off of traditional banking services (such as) holding deposits and making loans to small businesses or individuals,” says Suzanne Martindale, staff attorney at Consumers Union, an independent nonprofit consumer advocacy group and publisher of the magazine Consumer Reports.

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While you’re shopping, think about the features you need in a bank. Factors such as branch locations, ATMs and surcharges may be very important. While the big banks can offer a plethora of branches and ATMs, they no longer have the market on convenience cornered. Small banks and credit unions are catching up with technology.

“There are credit unions that have apps for mobile banking, so you can’t just assume that only the big banks have the convenience factor,” Martindale says.

After you’ve chosen a bank, it’s time to operate two separate bank accounts. Open the new account, but keep your old account open.

“You basically need to run a parallel bank account for at least two months,” Mierzwinski says.

Test it with deposits and then begin adding automatic deductions. It does take a little time and effort, so consumers may have to reach a boiling point with their fee-heavy checking account before they consider moving.

What’s with all the fees?

Savers aren’t the only ones struggling with low interest rates; banks have had their incomes cut as well. With rates as low as they are, they can’t earn as much from loans and other investments.

“Bank deposit balances are not worth as much as they were when interest rates were higher,” says Bert Ely, a consultant to the banking industry and president of Ely & Company in Alexandria, Va.

Regulations have crimped bank earnings as well. Following the financial crisis, the banking industry was hit pretty hard by new rules to protect consumers. Though the new rules are benefiting consumers, for instance, forcing banks to make customers opt in to overdraft protection, they’ve also had unintended consequences in the form of fees.

“Frankly, there was a period of time there where banks were collecting a lot of overdraft fees. People who didn’t overdraw their accounts were being subsidized by the people that were dumb enough to pay overdraft fees,” Ely says.

Don’t be dumb: Avoiding unnecessary checking fees requires paying attention. Keep an eye on statements and mailings from your bank for new fee announcements. If the fees can’t be waived, there may be a better bank out there for you.

Bankrate’s survey of five questions measures how secure Americans feel about their personal finances compared to 12 months ago. On Sept. 7-9, 2012, telephone interviews with 1,012 adults living in the continental U.S. were conducted by Princeton Survey Research Associates International. The results of Bankrate’s Financial Security Index have a margin of error of plus or minus 3.7 percentage points.