Watch Out: Checking Account Fees On The Rise, Again
If consumers bounce a check, use the wrong ATM or fail to have enough money in their checking account, they could pay dearly. A new study from Bankrate says banks continue to increase many of their fees.
JACKI LYDEN, host:
Speaking of banks, if you bounce a check, use the wrong ATM machine or fail to keep enough money in your account - who does that - you'll pay dearly. A new study finds that banks continue to rake in the fees, but changes are on the way.
NPR's Wendy Kaufman has more.
WENDY KAUFMAN: Banks bring in tens of billions of dollars each year and Bankrate, a company that keeps tabs on the industry, says those fees rose again in 2009. Overdraft charges are often the most expensive and sometimes come as a complete surprise.
Ms. LAUREN BOWNE (Consumers Union): So we asked consumers: If you had $25 in your checking account and you tried to take $40 out of the ATM, what do you think would happen?
KAUFMAN: Lauren Bowne of Consumers Union says nearly half of those asked thought the request would be denied: not enough money, no ATM cash. But most of the time you'll get the cash, along with a hefty fee for overdrawing your account.
Bob Meara, a senior banking analyst at the consulting firm Celent, says overdraft fees might also apply if you use a debit card to buy a morning coffee.
Mr. BOB MEARA (Senior Banking Analyst, Celent): A $4 latte at Starbucks could overdraft an account by 50 cents and produce a $35 overdraft fee. So, now the $4 latte is $40.
KAUFMAN: And overdraft fees can be assessed multiple times on the same day. Banks typically enroll consumers in overdraft plans, but often the customers don't know it. That practice has prompted an outcry. Consumer advocates want people to be able to choose whether to have overdraft coverage or not.
Federal regulations to do that have been proposed. With regulation looming, some of the nation's largest banks announced plans to let consumers opt in or out, and they announced some changes in when fees would be assessed. The vast majority of overdraft fees are incurred by a relatively small number of customers.
And says, Bob Meara…
Mr. MEARA: I think lost in the debate is the idea that these fees are 100 percent avoidable.
KAUFMAN: Still, they are often paid by those who can least afford them. In addition to overdrafts, banks often charge a fee if minimum balances on free checking accounts fall too low.
And, says Craig McBride of BankRate.com, banks charge for using ATMs that don't belong to them.
Mr. CRAIG MCBRIDE (BankRate.com): Particularly on small withdrawals, going to the wrong ATM can cost you a pretty penny and take a good chunk out of the withdrawal that you're making.
KAUFMAN: There are usually two fees: one from your bank and one from the ATM owner. The latter is called a surcharge and it averages well over $2 per withdrawal. You pay that, says McBride, even if you only take out 20 bucks.
Mr. MCBRIDE: If you're really in a pinch, use the debit card at the point of sale and get cash back.
KAUFMAN: Just be sure you won't get an overdraft charge in the process. Federal Reserve proposals for overdrafts are still pending. Meanwhile, Congress is also contemplating a crackdown on banking fees.
Wendy Kaufman, NPR News.
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