Checking Account Fees and How to Avoid Them

Checking account fees have become much higher in recent years, but there’s no reason you should pay them.

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Does your checking account have a monthly fee, or are you paying excessive amounts of money every time you use an ATM that doesn’t belong to your bank? If so, you aren’t alone. Checking account fees have become more widespread, and more expensive, in recent years.

The good news is that nobody needs to be paying checking account fees. There are typically a few ways to avoid paying fees, and there are some online options that can allow you to avoid checking account fees altogether without having to jump through any hoops.

How much do Americans pay in checking account fees?

Checking account fees have gone up significantly in recent years. Monthly maintenance fees charged by a U.S. branch-based checking account are typically in the $10 to $15 range. These can really add up over time -- a $13 monthly fee translates to $156 per year or $1,560 over a decade.

In addition to monthly maintenance fees, there are several other types of fees account holders could potentially face. For example, many banks charge account holders for using ATMs they don’t own. And despite the common misperception, this is in addition to any fee charged by the bank that owns the ATM you use. So if you use a non-bank ATM and your financial institution charges $3 and the ATM’s owner also charges a $3 fee, you’re paying $6 just to withdraw your own money. Plus, many institutions charge a lot more than $3 these days (anyone who has ever tried to use the ATM at a sporting event or in Las Vegas knows this well).

There are also some “penalty fees,” such as overdraft fees and nonsufficient fund fees, although there’s an obvious way to avoid them -- don’t overdraft your account. It’s worth mentioning also that many banks will refund a one-time overdraft fee for long-time customers who have an otherwise good track record. You’ll need to call the bank, and it doesn’t work in every case, but it’s certainly worth asking.

Most banks give customers a way (or a few ways) to avoid paying checking account fees

As I discussed in the last section, many branch-based checking accounts charge monthly account maintenance fees, and the amounts of these fees have increased in recent years.

The good news is that most banks that charge this type of checking account fee also give customers a way (or several) to avoid them. One common way to avoid a monthly checking account fee is by maintaining a certain minimum balance in the account. Some banks allow customers to avoid fees by directly depositing a certain amount of money into their account each month -- so by having your paycheck deposited, you can potentially avoid fees. Another common method is by making a certain number of transactions each month with a debit card connected to the account, with the idea being that the bank makes its money on transaction fees (from merchants), instead of from you.

As an example of how this works in the real world, one well-known bank offers its checking account customers three ways to get out of paying its monthly maintenance fee:

• Maintain a $1,500 minimum daily balance

• Have $500 or more in qualifying direct deposits

• Make 10 qualifying purchases or payments with the account’s debit card

And to be clear, one of these requirements must be met every month. You can pay the fee one month and have it waived the next. Plus, the numbers reset each month -- in other words, you can’t use your debit card 100 times one month and avoid the fee for the next 10 months.

An online checking account could be the best way to avoid fees

While branch-based checking account fees have skyrocketed over the past decade or so, there has been a surge of online banking products, including checking accounts, that have come onto the market in recent years. And most of them don’t charge any monthly fees whatsoever.

There are many online checking accounts that not only have no monthly account maintenance fees, but also have vast ATM networks or have some other way to allow customers to use ATMs for free. For example, one of my favorite online checking accounts not only doesn’t charge any fees for using other banks’ ATMs, but also offers reimbursement for any fees those banks charge you.

It’s also worth mentioning that not only do most online-based checking accounts have no monthly fees and generous ATM usage policies, but they also tend to pay significantly higher interest rates than their branch-based counterparts. Many branch-based checking accounts pay no interest at all, and most of those that do pay an extremely tiny annual percentage yield (APY). On the other hand, you can find online checking accounts that pay much higher rates.

Without naming any specific offers, one online checking account currently offers an APY of just over 2% and also offers free ATM withdrawals on the massive Allpoint network. Another online-based bank offers a 1.25% APY on its checking accounts, as well as unlimited ATM reimbursements within the U.S.

So not only can an online checking account help you avoid fees, but making the switch can actually make you money, especially if you maintain a significant balance most of the time. For example, if you maintain an average balance of $5,000, this translates to an extra $100 per year. That’s a lot better than you’ll get from any branch-based checking account that I’m aware of.

There’s no good reason to pay checking account fees

The bottom line is that there are so many fee-free options on the market that there’s no good reason you should pay a monthly account fee or should regularly need to pay ATM fees.

To be clear, this doesn’t necessarily mean you need an online checking account (although you can generally get more interest by going this route). If you always meet one of the requirements to waive fees in your branch-based checking account and the bank’s ATM network is large enough to meet most of your cash withdrawal needs, you don’t necessarily need to change.

However, if you find yourself regularly getting hit with a monthly checking account fee or needing to withdraw money from a costly non-bank ATM more than a few times a year, it could be time to make a change.

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