Avoid These Cities with High Overdraft Fees

NEW YORK (MainStreet) — When Elaina Renda moved to New York City from Albany four years ago, she opened a non-interest, all-in-one checking and savings account at a national bank that required no fees. She was thrilled with the acquisition until she went over budget and incurred a $38 overdraft fee.

"When I saw the charge on my account, I thought it was crazy, because $38 is such an arbitrary number and it's astronomical for an overdraft fee," said Renda, a holistic health consultant. "The first time it happened, my bank waived the fee, but after that you are powerless over the situation. Bankers have no mercy and give no leeway. They don't care what caused the overdraft. They are intent on collecting their money."

Renda is not alone. According to Bankrate.com's 16th Annual Checking Survey, average overdraft fees increased 3% to a record-high of $32.20.

"The higher overdraft and ATM fees roughly correlate with the rate of inflation," said Greg McBride, a senior financial analyst with Bankrate.com.

The ATM fees that consumers encounter when using an out-of-network ATM include the ATM surcharge assessed by the ATM owner and the foreign fee that the individual's bank charges for using an out-of-network ATM. Meanwhile, the average ATM surcharge increased 4% to $2.60 in the past 12 months, and the average foreign fee fell 3% to $1.53, according to Bankrate.

One word to the wise: record each ATM withdrawal in order to avoid overdraft fees.

"A receipt stuffed into your car's glove compartment isn't simply being unorganized, it can be a costly habit," said Gail Cunningham, spokesperson for the National Foundation for Credit Counseling. "Many an account has been overdrawn as a result of neglecting to notate an ATM withdrawal or debit purchase."

Cities with the highest average overdraft fees include Milwaukee at $34.16, Atlanta and Denver at $34.10, Miami at $33.89 and Houston at $33.53. Cities with the lowest average overdraft fees are $27.18 in San Francisco, $29.58 in Los Angeles, $30.32 in Cincinnati and Cleveland and $30.78 in San Diego.

Whether its to side step a foreign fee or out of network fee, either way Renda goes out of her way to make sure she has enough cash in her wallet when she travels so that she doesn't incur ATM fees for cash withdrawals out of her bank's network. In the past, she paid $5 to $6 when she dared to withdraw money from another bank's ATM.

"If I go to Albany for the weekend, I withdraw $100 from my bank ATM, but when I get back to the city I inevitably have to redeposit the money I didn't use," she said. "It can be inconvenient."

About 97% of checking accounts are either free or can become free if the account-holder meets certain requirements such as direct deposit or a minimum balance, which is the most common for interest checking accounts. The average for minimum balance requirements is $5,802, down 5% since 2012.

"While free checking isn't as common as it was just a few years ago, the decline slowed to a trickle this year," said Bankrate's McBride.

The average monthly service fee fell less than 1% to $14.64, which is a departure from the past six years.

--Written by Juliette Fairley for MainStreet

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