How Much Does Your Checking Account Cost You? [AUDIO]
Did you know your checking account could be costing you hundreds of dollars a year?
A new report by WalletHub.com, which examined the way in which checking account fees are displayed on banks' websites as well as how easy they are to digest, found that the average checking account has about 30 separate fees. Many of those charges are not clearly disclosed.
"We were shocked at the number of fees that banks have related to their checking accounts and the level of transparency in terms of disclosing those fees varies greatly," said WalletHub.com Founder and CEO Odysseas Papadimitriou. "We looked at the nation's 25 largest banks and in terms of transparency, their scores ranged from the best ones at 100 percent to the worst one at 16.7 percent."
Capital One, Fifth Third Bank and Citibank were at the top of the list in terms of transparency while M & T Bank came in at number 25 at 16.7 percent.
"Great disparity clearly exists among the checking account fee disclosures used by major U.S. banks. The good news is that even the worst performing banks aren't resigned to having poor checking account transparency forever. Improvement is merely a product of time and effort," said Papadimitriou.
"There is obviously a great deal of planning that goes into what information a bank chooses to display on its product disclosures as well as how it chooses to display it, and while financial institutions must balance legal requirements with what best promotes consumer understanding, they clearly need to go back to the drawing board in order to foster both simplicity and uniformity. Regulators will also need to step up and work hand in hand with them throughout this process, as they are mostly to blame for the failure to develop a simple, standardized checking account disclosure form over the years."
If you are trying to find the best checking account for you, Papadimitriou offers the following tips:
- Evaluate Your Practical Needs: As evidenced by the number of fees that checking accounts charge, they offer a plethora of services ranging from straightforward ATM withdrawals to international wire transfers. You must therefore consider what exactly you'll need from your checking account in practical terms. For instance, how much money will you hold in your account at any given time? Do you need a debit card, a physical checkbook, or an accessible local branch? How many ATM withdrawals will you make each month? The answers to such questions will eliminate certain checking account offers from contention and will dictate which fees you should focus on minimizing.
- Cast a Wide Net: When you begin your search for a new checking account, start broad and refine as you go. That means you should avoid entering the search process with any preconceived notions, such as the particular institution you'll get your account from, how large of a bank you wish to do business with, the necessity of in-person banking, etc.
- Forget About Debit Card Rewards: You shouldn't let debit card rewards bias your search for a checking account. Not only are debit card rewards far less common than they were before the Durbin Amendment took effect, but credit card rewards are also up to 8X more lucrative. So, if you really want spending-based rewards, get a rewards credit card with a high earning rate on your biggest everyday expenses.
- Carefully Review Account Terms: Once you have selected the account that you feel will best suit your needs, pour through the account agreement(s) with a fine-tooth comb. This is tedious work, but it can pay huge dividends by revealing restrictions and fees that you might otherwise be unaware of prior to experiencing them directly.
- Supplement with Other Accounts: A checking account will enable you to receive direct deposit of your monthly checking account, automatically pay monthly bills, and benefit from access to cash. You can't use a checking account for everything, though. You might therefore want to strategically supplement your checking account with an attractive savings account and/or credit card offer in order to make your financial management as efficient and rewarding as possible.
To see the full 2013 Checking Account Fee Transparency Report, follow this link.