Beating Bank Fee Increases

by Little House on 17 January 2011 10 comments
Photo: TossMyPancake

This past week I was helping a colleague sort through her financial statements and came across a notice from her Chase bank account. According to the notice, on February 8th her bank will be increasing her banking fees by a significant amount. Not only will her monthly fee increase from free to $6 since her account doesn't qualify for a fee waiver, but non-Chase bank ATM fees and overdraft charges will also increase by a few dollars each. This is just one bank out of many that intend to increase their fees this year.

However, there are alternatives to beat, eliminate, or reduce fee increases at large banks. One option is to meet their fee-waiver criteria. Often that includes having accounts that have monthly recurring direct deposits or keeping a minimum daily balance. Another more obvious option is to switch banks. As hesitant as I am about switching banks, it's a thought that has crossed my mind, especially considering there might be fee increases on my accounts in the near future. But one can't just up and switch banks without some research or due diligence.

The Importance of Convenience

For me, the biggest deciding factor on which bank to choose, or whether to switch at all, is convenience. Since I have various sources of income that often appear in the form of checks, I like knowing I have access to an actual bank branch or ATM. Since I also have an online money market account that's more difficult to access (no available ATM or bank), my local bank branch is where most of my monetary activity takes place.

Analyzing my banking habits a little more closely, I could probably do without an actual branch, but an ATM location is a necessity, especially now that many ATMs digitally scan check deposits and credit those amounts the same day. This narrows down my options a bit, or at least eliminates online-only options for my everyday checking needs.

Where to Research

Knowing my banking habits and what I would like or need in a bank, I came across a site that helped me narrow down my search, Find a Better Bank. Using Find a Better Bank, I was able to use my zip code as a starting point and search within a five-mile radius, though their options include up to 50 miles. Next I selected banking features that applied to my personal situation from "Don't Care" to "Nice to Have" to "Must Have." Some features included interest-bearing checking accounts, mobile banking, debit card rewards programs, online bill pay, and overdraft protection to name a few.

I also answered some questions that would help determine how many fees I accrue a year for a rough estimate of potential matching banks. For instance, one question asked how often I use another bank's ATM, or how often have I been overdrawn in a year. Knowing that fees are possibly increasing this year, I can use this as a guideline to sort out the banks that are already more expensive from the ones that are less fee-heavy. Find a Better Bank also claims they monitor the banks every 90 days for the most up-to-date information, helpful if fees do begin increasing this year.

Finally, based on my answers to these questions, Find a Better Bank displayed a list of possible results sorted by estimated annual fee. However, the results also allowed me to sort by distance and percentage of preferred features. The least expensive bank was missing a few preferred features, but none that were important in the grand scheme of things. Coincidentally, the bank I currently use was listed as the most expensive bank on the list.

Bank Comparison

Find a Better Bank results also allowed me to compare two to three banks at a time, allowing me to see the differences between basic account information, like the minimum to open an account, account fees, and services. I was surprised at the differences between the least expensive options and the most expensive options. Two particular banks seemed very appealing, and one of them has locations near me.

Since my bank hasn't raised my fees yet, I'm still a bit hesitant to switch banks. I also realized that Find a Better Bank compares particular checking and savings accounts for each bank, and I didn't see the one I currently use in the results. This may have explained why my bank came out as most expensive on the list, yet I don't pay many fees myself. However, knowing that I have options if my bank follows suit and increases fees this year gives me a peace of mind.

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Guest's picture

Thanks for reviewing FindABetterBank. We are starting to see banks introduce new fees and adjust minimum requirements to avoid monthly service fees. We believe we're going to start seeing more banks charge annual fees for atm and debit cards. The first iteration will be annual fees for debit "rewards" cards. But soon enough, annual fees will extend to plain debit cards and even atm cards -- particularly on accounts that require no or low minimum balances.

The large national and regional institutions (this group owns about 80% of all household deposits) will be the primary offenders of imposing new fees and raising minimum requirements. It takes energy to switch banks... so they're counting on our inertia (why not? it's worked for them so far). The good news is that there's competition. Online banks are winning customers over with reasonable interest rates on checking and savings accounts, online and mobile apps that negate the need for branches, atm fee rebates and access to large surcharge-free atm networks. Community banks and credit unions are also good -- less expensive -- alternatives. They've overcome their small footprints with similar atm access and rebate policies as online banks. Many of these local institutions offer competitive rates on loans like mortgages and auto loans.

At the end of the day, there will always be no-fee banking options, but you will have to figure out whether it's worth it to switch. We hope FindABetterBank makes this process easier.

Rob Rubin

Little House's picture

@Rob Rubin - Thanks for commenting on my article. Though it's awful that banks are raising fees this year, it's good to know your site is already on top of that information giving consumers a way to compare banks and rates. This service is very helpful. Thanks again for the additional information.

Guest's picture

I got that same letter from Chase about my checking acct. I have already sent them a letter to close the account, which seems to be taking a very long time. Anyway, this will be the third checking account I've now closed in order to avoid these new fees. So far, luckily, our local bank is still offering free checking, so closing these other big-name-bank accounts isn't really causing any problem. However, it's quite annoying since all of them were opened specifically because the bank promised free checking, not free-until-we-need-more-money checking... Thanks for the link to FindABetterBank.com. I may end up using that if this trend continues.

Little House's picture

You're welcome. It's too bad that as soon as you get comfortable with a bank, they raise their "free" checking to "fee" checking. Chase seems to always be at the forefront of the change, too.

Guest's picture
Jesse

Great tips! I got the letter from Chase too and even though I have had them for years, I did my research and switched banks before the fee went into place. This info could have come in handy a couple weeks ago ;)

Little House's picture

Well, at least you took the time and looked for a better solution before the fees went into effect.

Guest's picture
FinEngr

How ironic I posted that quote from Demon Dimon on your site and here goes Chase again...

And yesterday it was released that Chase overcharged some 4000 servicemembers on their mortgages...

You absolutely should consider switching banks and you should never accept maintenance or annual fees - no matter your balance. CREDIT UNIONS for the win.

I've got to disagree with you regarding ATM convenience. Brand locations are somewhat outdated as many banks waive other banks fees.

Little House's picture

Thankfully, I don't bank at Chase (of course this was the prompting behind this post!). However, I do bank with another large banking institution which will probably raise fees in accordance with the other big banks. And I agree, I think Credit Unions are probably a better bet. Especially since many waive ATM fees. I'm just glad I found a way to quickly compare 2-3 banks in my area!

Guest's picture

While many experts agree that consumer response to this trend will dictate whether smaller banks follow suit, alot of this is in consumers' control. A recent study showed that most consumer bank fees are completely avoidable-- like ATM surcharges and overdrafts. The moral of the story? Know what your bank does and doesn't charge you for, stay on top of it because it's always changing and manage yourself to manage your money.

Guest's picture
Guest

FYI: Credit Unions have lower fee's because they dont have to pay taxes