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So-called junk fees can be tricky.
The Consumer Financial Protection Bureau has been scrutinizing some banking fees, including those for overdrafts and non-sufficient funds, that can catch customers by surprise — and are “likely unfair and unlawful,” according to the agency.
The consumer watchdog proposed a rule prohibiting financial institutions from charging certain fees on debit transactions and reducing typical late fees to $8 from roughly $30. That could save the public as much as $9 billion a year, according to the White House.
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Since then, many banks have lowered their overdraft and non-sufficient funds fees, and a few have eliminated them altogether. But at the same time, fees for using an out-of-network ATM jumped to a record high of $4.73, according to a new report by Bankrate.
ATM fees rise while overdraft, NSF fees fall
“ATM fees are biting harder than ever,” said Greg McBride, Bankrate’s chief financial analyst.
The average ATM fee rose to $3.15, marking the 22nd record high in 25 years, Bankrate found, based on data from non-interest and interest accounts and the surcharges that go along with them. When factoring in the combined fees for using an out-of-network ATM, the average fee is $4.73, also a fresh high.
On the upside, overdraft fees and non-sufficient funds fees are now significantly lower. The average overdraft fee fell 11% to $26.61 from last year’s average of $29.80, while non-sufficient funds fees hit an all-time low of $19.94, on average, according to Bankrate.
However, few banks have done away with them altogether: 91% of banks still charge overdraft and 70% charge non-sufficient funds fees, Bankrate also found.
Last month, the CFPB ordered Bank of America to pay more than $100 million to its customers and $150 million in penalties for double-dipping on overdraft fees, among other violations.
“Despite recent progress in addressing overdraft fees, the job is far from complete,” said Nadine Chabrier, the Center for Responsible Lending’s senior policy counsel, in a statement.
Monthly fees can be hard to avoid
While free checking accounts are widely available, many banking customers are encountering monthly service fees and rising balance requirements, Bankrate found.
More than a quarter of checking account holders, or 27%, are regularly hit with fees, which can add up to an average of $24 per month, or $288 per year, according to another survey from Bankrate.
The average fee on an interest checking account is typically even higher, while the average yield is just 0.05%.
“Avoid accounts that require stranding a balance to avoid fees when you can get a free checking account and move your excess funds into an online savings account at a time when yields exceed 5%,” McBride said. (Here are a few more competitive options worth considering.)
“Consumers can almost always avoid other account fees by using direct deposit, maintaining a minimum balance or limiting the use of ATMs that are not affiliated with their bank,” said Mike Townsend, a spokesperson for the American Bankers Association. “If you must use an ATM outside of your bank’s network, consider a larger withdrawal to avoid having to go back multiple times or using the free cash-back feature on debit card purchases.”
Some banking interest groups also countered that offerings such as overdraft protection provide a much-needed safety net.
Without the option of overdraft protection, “people are more likely to turn to predatory lenders, hurting the same people the administration seeks to help,” said Jim Nussle, president and CEO of the Credit Union National Association, in a statement.