Even with the wide availability of free checking services, more than a quarter of checking account holders – 27% – pay a fee each month.
For consumers who don’t take advantage of free checking, those fees add up to an average of $24 per month, or $288 per year, according to a new survey from Bankrate.com. The personal finance website conducted the survey online from December 7-12, and included 3,657 adults, of whom 3,069 had a checking account.
The research found that the fees come from fees for routine services or ATMs and overdrafts. Bankrate research found that the average overdraft fee costs $29.80, while the average fee for insufficient funds is $26.58.
Annual amounts may not seem like much, said Sarah Foster, an analyst at Bankrate.com, but they can add up to $5,000 if you stick to your checking account for 17 years, as the average consumer does.
Nixing bank charges are an easy way to free up more money in your budget, especially with rising inflation and expectations of a recession rising. Paying these extra costs could dent consumers’ budgets and make them more vulnerable in the event of a downturn.
“It’s a really important and easy way to make sure you don’t spend more money than you should,” Foster said.
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Which generation spends the most on checking fees?
A Bankrate.com survey found that young adults are the most likely to pay fees.
Generation Z, ages 18-26, is at the top of the list, with 46% of this generation’s checking account holders paying a monthly fee. Bankrate.com found that this group pays about $25 per month.
Millennials, ages 27 to 42, are next, with 42% of account holders paying a monthly checking fee, Bankrate.com found. The study found that they usually pay more compared to other generations, at $28 per month.
Older groups — Gen Xers, ages 43 to 58, and baby boomers ages 59 to 77 — are less likely to pay account verification fees.. That includes just 22% of Gen X and 14% of baby boomer checking account holders, who pay $17 and $22 per month, respectively.
More than half of Gen Z — 56% — and Millennials — 52% — say they are sacrificing recession preparedness because of the monthly fees they pay. In comparison, 46% of Generation X and 35% of Baby Boomers said the same.
The survey found that monthly fees set consumers back on goals that include paying down debt, saving for emergencies, or achieving major goals like buying a house or car, paying for college, or setting aside money for retirement.
Measure the true cost of your checking account
To find out what you’re really paying for in your checking account, you should monitor your statements at least monthly, according to Bruce McClary, senior vice president at the National Foundation for Credit Counseling.
Start with the basics — look at your transactions to make sure they’re accurate, he said. Then evaluate your transactions and withdrawals and any account maintenance fees that may arise.
If you feel you’ve been charged in error, McClary said, that should prompt a conversation with your bank.
Keep in mind that there may be adjustments that your bank or credit union may be willing to make. If you let your financial institution know your personal situation, Foster said, they may be willing to waive certain fees, especially first-time fees.
“There’s no guarantee it will work, but networking will never hurt you,” Foster said.
“Shop for opportunities”
Also assess if there are fees you can avoid, such as canceling withdrawals from out-of-network ATMs or by maintaining a required minimum balance.
If possible, try to find free savings and checking services, McClary said.
“Shop around for opportunities,” McClary said. “If your bank or credit union doesn’t offer them, this may be an opportunity to move your business elsewhere where it may be more affordable.”
Foster said opening a new account at another organization can seem daunting, particularly if it requires an office visit and a physical transfer of cash. But the savings over time may more than make up for the hassle.
“While changing a bank can be a very upsetting move, it can help you build wealth in the long run if it means not paying for a service you can get for free elsewhere,” Foster said.
And if you find that you’re not happy with your new account, she said, you can always move your money elsewhere.