Bankrate.com says fees for bounced checks, ATMs on the rise

NEW YORK (AP) _ The cost of overdrawing your checking account has gone up again, according to a study of bank fees released Tuesday. <br/><br/>Bankrate.com said a survey of banks and thrifts in the nation's

Tuesday, April 18th 2006, 3:55 pm

By: News On 6

NEW YORK (AP) _ The cost of overdrawing your checking account has gone up again, according to a study of bank fees released Tuesday.

Bankrate.com said a survey of banks and thrifts in the nation's 25 largest markets found that the average fee for a bounced check rose to $27.04 this spring from $26.90 last fall.

That's the second highest on record, behind the average $27.13 a year ago, according to Bankrate.com, an online financial information service based in North Palm Beach, Fla.

The survey involving 248 institutions also found that surcharges have risen on automated teller machines, or ATMs, to $1.60 this spring from $1.54 last fall. Two years ago, ATM surcharges _ which are imposed when consumers use ATMs that aren't owned by their own bank _ averaged $1.32, Bankrate.com said.

Bankrate.com said that the ``one bright spot'' was that banks have reduced the amount they charge their customers who use ``alien'' machines. These fees dropped to $1.29 from $1.37.

Bankrate.com estimated that consumers probably will pay some $4.2 billion in ATM service charges this year.

Fees have been rising in recent years because financial institutions have found them to be a more-predictable form of income than interest charges, which can rise and fall as market conditions change.

As a result, financial institutions have become more dependent on such fees to generate profits. Charlotte, N.C.-based Wachovia Corp., the nation's fourth largest bank, reported Monday that in the first quarter, fees for the first time generated half the bank's revenue.

Greg McBride, senior financial analyst for Bankrate.com, said that although fees are higher, there are ways consumers can work around them.

He said that a growing number of banks use a tiered structure for overdraft fees, charging about $25 for a single bounced check but increasing its fee to $30 for subsequent overdrafts.

``If you bounce a check every three months, that's more than $100 a year'' in fees, he said. ``Instead, sign up for overdraft protection _ ideally one that links your checking account to your savings account.''

On ATMs, McBride suggests restricting cash withdrawals to your own bank.

``If you're really in a tight spot, use your debit card to get cash back when you buy something,'' he added.

The survey also compared minimum deposits and average yields on checking accounts at online banks and brick-and-mortar banks:

_ Minimum to open and interest-bearing account: $605 at Internet banks, $429 at traditional banks.

_ Average Yield: 1.96 percent at Internet banks, 0.32 percent at traditional banks.

_ Minimum balance to avoid fees: $1,250 at Internet banks, $2,465 at traditional banks.

_ Monthly service fee: $5.50 at Internet banks, $10.85 at traditional banks.