Banks are grasping at any means to restore profits to pre-crisis levels. They have already raised rates on credit card accounts, bumped up late-payment fees and penalty rates. Costs are creeping back into checking accounts, too. Bounced check fees rose 2% last year, ATM fees rose 12.6% and monthly service charges rose 5%, according to Bankrate.com.
Some of the biggest banks are adding back fees they used to waive in basic, or “free” checking accounts that drop below minimum balances. Citigroup ( C – news – people ), for example, last year said it would reinstate a $7.50 monthly account fee for EZ Checking customers whose balances dip below $1,500. For customers unable to maintain that threshold, the charges add up to $90 a year.
JPMorgan Chase‘s ( JPM – news – people ) “better banking” accounts have a minimum daily balance requirement of $1,500 or combined monthly average balance of $5,000 in a linked deposit, loan or investment accounts to avoid the monthly fee. Otherwise, it’s $12. At Bank of America ( BAC – news – people ), “MyAccess” checking is free if the account is opened online, otherwise it’s $8.95 a month, which the bank increased from $5.95 last year.
If fee hikes lead you to consider switching banks or account types, here are a few things to consider.
First, because bank failures are expected to continue and increase in number, picking a bank or thrift with deposit insurance from the Federal Deposit Insurance Corp. is the best bet. Nonprofit, membership-based credit unions, which often offer lower fees and better rates on bank products, have their own version of deposit insurance as well. The insurance limit is $250,000 per individual until the end of 2013.
Second, what are your needs? If you just need basic checking, bill pay, ATM access and a debit card, search for accounts that don’t charge fees if you’re below a minimum balance or fees of 25 cents or more for each check written. Web sites have sprouted up to help the search, including Bankrate.com, mybanktracker.com and findabetterbank.com
The most bare-boned type of account is zero-interest basic checking. Most banks offer it for customers who agree to have their payroll checks automatically deposited, although again, some big banks are starting to reinstate monthly service charges if minimum balances aren’t maintained. The average minimum deposit to open these basic accounts is $68.
Interest-bearing checking accounts, on the other hand, have monthly service charges that average $12.55 (a record high, according to Bankrate.com), and an average minimum balance of $3,400. The average minimum deposit to open one is $473.
Next, consider how many branches and automated teller machines a bank has and whether those locations are convenient for you. Banks charge customers for using other banks’ ATMs–the controversial “foreign ATM fee.” Last year, the average fee banks charged non-customers for using their ATMs rose 12% to more than $2, according to Bankrate.com. Your own bank is going to charge you, too, an average of $1.32 for using another bank’s ATM.
So if you travel a lot or commute a distance from home to work, a bank with widespread branches and many ATMs is probably going to cost you less than a bank with a more limited range.
Another thing to consider is the way you manage your accounts. Last year, banks raked in $40 billion in checking overdraft fees, one-time charges that average $27 for each bounced check or debit overdraft charge, but can be as high as $35 an item. There was such an uproar over it that federal banking regulators instituted new rules, forcing many banks to alter their policies on overdrafts and requiring them to get a customer’s consent to overdraft protection instead of automatically offering it. Critics of overdraft practices in the past say they disproportionately hit people who lived on tight finances.
Because overdraft fees basically subsidized free checking for all, the push to reduce them is forcing banks to reconsider how they charge for checking account services overall. As in credit cards, now everyone is bearing a higher cost.
One way to avoid overdrawing your account is to sign up for e-mail or mobile text alerts from your bank to notify you of a low account balance. Most banks still offer this for free.