Tuesday, May 19, 2015

Account Fees, Money Down the Drain

9/2/14 - While certain checking accounts can be cost-free, the vast majority of checking account holders are forced to pay penalties, fees, and monthly maintenance charges. Apparently, as described in an article by E. Scott Reckard, of the L.A. Times, based on information from a personal finance website called MoneyRates.com, average costs of owning a checking account are on the rise, and there's not much that any of us can do about it.

While more than one-third of all checking accounts were fee-free at the end of 2012, recent statistics show that such accounts now encompass only 28% of the total checking accounts, while the rest are drowning in new increases in “maintenance costs.” Average monthly costs for such accounts are now over $12, meaning such account holders have to pay around $150 a year just to keep an account open. Throwing away $150 a year for no real reason doesn't seem like such a good investment.

While the above statistics come from MoneyRate's surveying of 100 brick-and-mortar banking institutions, Reckard presents further evidence that a large percentage of checking accounts in credit unions and online banking institutions get through each month without any maintenance fees. According to Reckard, as much as two-thirds of all such online checking accounts are free to the user, and yet individuals still seem hesitant in trusting their checking accounts to such institutions.

People tend to dislike change, and it appears that many consumers would rather stick to a checking account they have had for years rather than shop around for an account with fee-free options, such as those for students and seniors. However, from rises in overdraft fees to a startling increase in the amount required to open a new checking account, new fees and raised prices may actually hurt banking institutions in the long run. Once individuals begin to see that the costs for accounts through such “traditional” banks are prohibitively high, we may begin to see an abrupt shift to more “unconventional” online accounts in the search for lower fees, reduced charges, and a general decrease in expenses.

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