It’s hard to tell which is piling up faster — the fees bank customers have to pay these days or the research showing just how pervasive these fees are.
Bankrate.com just issued a new survey of checking account fees. (Spoiler alert: they’ve gone up!) The site says checking fees hit “record highs” in 2012. Nearly every fee in its survey climbed, some by more than 25%.
Ironically, one of the reasons behind this fee-ing frenzy are regulations designed to protect us from fees: The American Bankers Association estimates that it costs $250 to $300 for a bank to maintain a customer’s checking account over the course of a year. That total includes expenses like customer service (i,e. paying tellers and call center employees), keeping websites up-to-date and safe from hacking, ATM maintenance and so on.
Banks used to pay for this primarily via fees, overdraft fees in particular. “Overdraft fees are big money to most retail banking operations. It is the engine that pulls along free checking,” consulting company Celent wrote in a 2010 report shortly before the new overdraft rules kicked in.
The Federal Reserve‘s Reg E, the rule that put a stop to the overdraft gravy train, prohibited banks from automatically enrolling customers in overdraft protection plans that would let debit purchases go through even if doing so put the account into the red. The customer would then incur a fee, often in the $35 ballpark, for overdrawing their account. Reg E said banks needed to offer customers the option of choosing overdraft protection and make the default choice not covered (and therefore not subject to the $35 fee) rather than covered.
This is a big reason why only 39% of the 247 banks in the most recent survey offer what Bankrate calls truly free checking; that is, an account that doesn’t charge a monthly fee and doesn’t require a minimum balance to waive the fee. Just three years ago, 76% of banks offered free checking.
Even as those monthly fees are getting harder to avoid, they’re also getting pricier. Bankrate found that the average maintenance fee is now $5.48, a 25% increase over 2011. Think that’s bad? An analysis by the Wall Street Journal found that, over the past five years, this fee has climbed 142%.
The minimum balance required to avoid the monthly fee climbed 23%, to $723.02, Bankrate found. A five-year lookback by the Wall Street Journal found that this amount also skyrocketed, climbing 365% since 2007.
If this sounds like deja vu, you’re right: MoneyRates.com conducted a survey last month that found what it calls “a comprehensive trend” of climbing costs for maintenance and overdraft fees. The minimum requirement to avoid those fees increased over the past year, along with the amount it costs to open a new checking account. Both MoneyRates and Bankrate found that the cost to use an out-of-network ATM has also increased.
The funny thing is banks still earn a lot of money from overdraft fees. Last year, we shelled out $31.6 billion, according to Moebs $ervices. This is down from the peak $37.1 billion we paid in 2009, but it’s still not exactly pocket change.
Banks did a lot of marketing to try to convince people to sign up for overdraft protection; they’ve been pretty successful, to the chagrin of consumer advocacy groups who charge that banks get people to sign up by basically scaring them into thinking they need the protection or making the opt-in language so confusing that customers choose the opposite of what they think they’re getting. Both The Pew Charitable Trusts and the Center for Responsible Lending conducted studies that reached this conclusion.
In the meantime, those fees just keep climbing.