People with low checking account balances pay over $500 a year in fees

Published: Aug 18, 2016 11:06 a.m. ET

The average checking account has 22 fees, WalletHub found

By Sushma U N
Reporter
sushma.udipinagendran@dowjones.com
http://twitter.com/sushmaun

Despite several government regulations to help protect consumers, checking account fees are soaring for people with low balances.

A cash-strapped consumer — defined as one whose account frequently dips below $0, who opts-in to debit card overdraft often, and doesn’t have direct deposit — pays roughly $522 a year in fees to maintain his checking account, up from around $470 last year, according to a report by the personal finance website WalletHub. And consumers could pay as much as $810 a year in such fees. The different fees depend on the bank, the services the customer opts for, the minimum balance and other factors.

WalletHub also found that the average bank checking account has approximately 22 total fees, and 60% of accounts have 20 to 40 different categories of fees. “With certain checking accounts charging close to 50 different fees, it’s nearly impossible to keep track of the growing structural complexity of this supposedly basic banking tool,” the report said.

A lot of these penalties are for overdraft fees. Banks on average charge $35 each time a balance goes below $0 for a transaction. According to a report by The Pew Charitable Trusts, a nonprofit organization in Philadelphia, 10% of Americans paid at least one overdraft penalty fee in 2013. ... One way consumers can minimize the fees they pay is by moving their checking account to a credit union or online-only bank, WalletHub said in the report. .... By switching to a credit union or using prepaid cards to avoid overdraft fees, customers can save on their checking account fees, and cash-strapped consumers in particular could save up to $423 a year, the report said.