About a quarter of Americans with checking accounts are having to fork out hundreds of dollars in bank fees at a time when the cost of living is rising, costing them cash they could direct elsewhere, research shows.
The expenses, from ATM charges, service costs and overdraft fees, can come to about $24 a month, according to a Bankrate survey from earlier this year, and annually it gets to about $288. Saving on those fees could allow households to redirect the cash towards debt, retirement funds or other financial priorities.
Millennials and younger Generation Xers, are getting squeezed more than any other demographic group on checking account fees, the survey showed. About 40 percent of this group—18 to 26 year olds and 27 to 42 years olds—find themselves saddled with those costs, while only 14 percent of baby boomers, for example, are paying for such services.
"Their older counterparts also tend to pay less on average each month, at $17 for Gen X and $22 for baby boomers versus $25 for Gen Z and $28 for millennials," the survey said.
Prices for goods has been elevated for more than two years making Americans increasingly concerned about their livelihoods and financial conditions over the next year. Avoiding costs, such as bank fees, could add a little more cash in their pocketbooks.
The Biden administration this month announced a variety of measures to crack down on what they described as junk fees that are hurting Americans.
"Junk fees cost American families tens of billions of dollars each year and inhibit competition, hurting consumers, workers, small businesses, and entrepreneurs," the White House said in a statement.
Some of the regulations the government has proposed includes more transparency from banks when it comes to costs of transactions, refunds for surprise overdraft fees and scraping of charges for bank statements.
In an August study, Bankrate found that out of network ATM withdrawal costs were at a three year high at nearly $5 a transaction.
"ATM fees are biting harder than ever as the cost of out-of-network withdrawals hits a new record high," Greg McBride, Bankrate's chief financial analyst, said in the report. "But with less need for cash and expansive ATM networks that make it easier than ever to stay within network, the fees are easily avoidable and need not be a frequent drain on your bank account."
Convenience is a big reason why customers stay with banks that charges them fees despite potential alternatives that could help avoid them, the survey said.
Tips on How to Save on Bank Fees
The American Bankers Association (ABA) has tips for how to ensure customers are able to save on bank fees.
Look for banks that offer free checking and savings accounts, it said.
Having direct deposit of one's income will ensure that accounts have cash, helping to keep a minimum balance that can protect against overdraft charges. Having multiple accounts at a bank can facilitate a better relationship, which can assist in customers avoiding paying fees. Signing up for automatic alerts can be useful in giving a customer a clearer, regular update of their balance, so they don't fall below a level that can cost them.
Increasingly, a majority of Americans manage to avoid monthly fees, ABA said. But for those who are spending on such outlays, it could add up.
"Avoiding unnecessary fees is part of the recipe for financial success. Over the coming two decades, assuming the annual rate and level of savings doesn't change—which it will—one would have another $5,760 to work with," Mark Hamrick, Bankrate's senior economic analyst, wrote.
Uncommon Knowledge
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Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
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Omar Mohammed is a Newsweek reporter based in the Greater Boston area. His focus is reporting on the Economy and ... Read more
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