I came across a good article on WalletHub.com on comparing checking account fees, “2013 Checking Account Cost Comparison Report.” The article compared five consumer profiles using a variety of banking patterns and chose the most basic, commonly used fees to compare the annual checking account costs of twenty-five (25) of the largest US consumer-facing banks, based on total asset volume as reported by the FDIC.
The study looked at five typical users:
Old School: a person who uses direct deposit, writes checks to pay their bills, keeps a minimum balance of $5,000 and never allows his account to fall below $0. He receives a paper statement.
Young and High Tech: a person who uses direct deposit and pays all of their bills online. He occasionally lets his balance dip below $100 and a few times a year will go below $0, but does not carry overdraft protection. He receives an online statement.
Cash Strapped: a person who deposits checks when received and writes checks and uses ATMs. Four to six times a year, his account goes below $0, but he carries overdraft protection so bills are paid. He often pays extended overdraft fees for insufficient funds and receives both online and paper statements.
Average Joe: a person who uses direct deposit, pays his bills online, uses ATM, and writes one or two checks per month. He may unknowingly allow his balance to go below $0, but does not carry overdraft protection. He too receives both online and paper statements.
International and On the Go: is a person who uses direct deposit and both writes checks and uses online bill payment services. He travels internationally so he frequently uses international ATMs and wires funds, but he never allows account to fall below $0. He receives an online statement.
Not surprisingly, the cash-strapped consumer pays the most for banking services—upwards of $650 per year—through fees for out of network ATM transactions, overdraft protection and perhaps minimum daily balance requirements.
At Henssler, we often recommend keeping enough cash in your bank account to not be charged fees for checking services. However, that can come with an opportunity cost of not having that cash invested elsewhere. Although, with current interest rates near 0.01%, there is little difference in keeping the cash in your bank account for liquidity rather than holding CDs.
We give credit to the Dodd Frank Act for curbing how banks charge fees. One change the act made was how banks handled deposits and checks. Banks must first credit any deposits made to your account before cashing checks. They must also cash checks beginning with the lowest amount first. Before, if you had $50 in your account with four outstanding checks for $1, $1, $1, and $50, a bank could debit your account for the $50 check first, then charge you a fee for the three additional bounced checks. Today, a bank has to debit the lesser checks first, resulting in only one bounced check fee.
Fees are the main drivers of bank profits in this low interest rate environment. As a consumer, you have to monitor the services you use and pay attention to what you are charged.
At Henssler Financial we believe you should Live Ready, and that includes understanding how necessary banking services may cost you more than necessary. If you have questions regarding your financial situation, the experts at Henssler Financial will be glad to help. You may call us at 770-429-9166 or email at email@example.com.