Overdraft fees hit another record high this year—here's how to avoid them

Checking account balance getting low? That could cost you more than ever.

Overdraft charges hit an average of $33.58 this year, a new record high and up slightly from last year's average of $33.47, according to Bankrate's 2021 Checking Account and ATM Fee Study.

The average monthly fee for interest checking accounts hit $16.35, the study found, also a new record.

Bankrate's study analyzed fees on interest and non-interest bearing accounts, as well as debit and ATM fees at 10 banks in the 25 largest U.S. metro areas.

There is some good news. The percentage of free checking accounts offered by banks increased for the sixth year in a row. Now, almost half of all non-interest checking accounts are free, which saves consumers money.

And the total average cost for using an out-of-network ATM fell for the second straight year, to $4.59. That includes an average of $3.08 charged by the owner of the ATM and $1.51 charged by the customer's own bank to use a competitor's machine.

How to avoid banking fees

Checking account fees are easy to avoid. Many are already free to use, particularly those that are not interest bearing. For others, customers can usually avoid a fee by signing up for direct deposit, by making a certain number of ATM transactions each month or by reaching a set minimum balance requirement.

How to avoid the fees will depend on the bank and the account, but is disclosed on most banks' websites.

To avoid ATM fees, customers need to stay inside their bank's ATM network. Most institutions offer a digital map of locations on their website or app. Consumers can also often get cash back for free at many stores when they pay with a debit card.

In some cases, banks will refund consumers' ATM fees each month, up to a certain amount. Online bank Ally, for example, reimburses up to $10 per statement cycle.

Overdraft fees can be trickier to avoid, and they are especially pernicious because consumers can be hit with multiple overdraft fees in one day, depending on their spending.

But consumers can set daily account balance alerts to keep tabs on their balance, Bankrate suggests. Additionally, linking a checking account to a savings account for immediate transfers can help make up the difference.

Consumers can also opt out of overdraft protections by contacting their bank or changing settings online. Just note that debit card transactions will be declined if the check account balance is exceeded. But that's likely better than owing an extra $33.

And if overdrafting is a routine problem, consumers can switch to a bank that doesn't charge the fees at all, like Ally or Chime (up to $200).

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