Banks Find New Ways to Raise Fees

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Banks are pretty stingy these days, with yields on interest-bearing checking accounts averaging an infinitesimal 0.105%, according to the BankingMyWay survey. So maybe it’s time to find a bank that’s more generous.

Or maybe not. Even the most “generous” checking accounts pay so little that interest earnings probably shouldn’t be a major factor when you're shopping around. That’s among the tips recently offered to consumers by the Federal Deposit Insurance Corporation (FDIC), the agency that insures bank savings and takes over failing institutions.

Because new federal rules limit certain bank fees, many banks are raising other fees that aren’t covered, the FDIC says.

If your bank cuts back or eliminates interest on your checking account, or scraps it’s free-checking accounts, it makes sense to shop for a better deal. Use the search tool. But don’t focus exclusively on interest earnings or “free” checking, because other requirements may be more important.

Those may not be a burden. You might get interest or free checking by agreeing to have your paycheck automatically deposited in your account, for instance, or by agreeing to receive your monthly statement by email instead of snail mail, or by agreeing to limit the number of transactions you can do in a month, the FDIC says.

Also, to get the best deal you may have to maintain a minimum balance of hundreds of dollars, or perhaps more. That can be annoying if there will be little or no interest earnings. But the fact is that minimum-balance money might not earn much elsewhere, either, especially if you want it to be accessible on short notice. The average savings account yields just 0.181% and the average money market only 0.257%.

“In today’s low interest rate environment, it might be better to choose a free account that pays no interest or only a small amount of interest instead of selecting an account that pays a modest interest rate but imposes a monthly fee,” the FDIC says.

“Similarly, it may be better to maintain a balance and avoid a monthly fee rather than putting that money in an account paying a modest interest rate. In both cases, any interest you would earn will probably be a lot less than the monthly fee, which can be $10 or higher.”

At today’s low rates for interest checking, you’d have to have more than $100,000 in the account for the interest earnings to offset a fee of $10 a month, or $120 a year. It just doesn’t make sense to pay a high fee to earn so little interest.

One downside to using a bank with free or low-cost checking: your bank may charge for ATM transactions above a monthly limit, or it might not have many ATMs in your area. Using another bank’s machines could trigger charges, offsetting the benefits of a low-cost checking account.

But you may be able to get around these problems by using the “cash back” feature when you make purchases with your debit card. Typically, there’s no charge for these transactions at supermarkets and other retailers, and these withdrawals don’t count toward your ATM limit, though you should check this is the policy before you open a new checking account.

—For the best rates on loans, bank accounts and credit cards, enter your ZIP code at BankingMyWay.com.

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