Checking Account Cost Comparison Report

Checking accounts charge up to 50 different fees. And they aren’t always disclosed that clearly. As a result, the cost of everyday checking can vary by hundreds of dollars per year depending on the account you choose and how you use it.

To help consumers make money-saving decisions, WalletHub compared the cost of each checking account offered by 35 of the largest banks and credit unions. We did so using five consumer profiles designed to represent a wide range of banking styles. Below, you can find a breakdown of each profile’s characteristics as well as the best checking accounts for each group.

Market-Wide Findings

• Your checking account could cost as much as $750 per year if you choose wrong and do not adjust your banking habits based on the account’s price structure.
• People who find themselves repeatedly overdrawing their accounts can save $360 per year, on average, by switching to the right checking account. The one major tradeoff is that you might have to give up your paper checkbook.

 

• The less money you have, the more a checking account will cost you. The average Cash Strapped consumer would incur roughly $474 in fees each year.

 

• All consumers can save on everyday banking by gravitating to checking accounts from credit unions and online-only banks, with Cash Strapped consumers eligible to save the most money on average: up to $387 per year.

 

• Checking accounts are far from one-size-fits all. The most affordable offer for one person isn’t likely to be the cheapest for someone else.[1]

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[1] The average Pearson correlation coefficient of the rankings of all scenarios was 0.22.

Most & Least Affordable Accounts

 

Note: Negative numbers indicate the user would make money by having the account.
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5 Tips for Finding the Best Checking Account

Clearly, checking accounts can be quite costly. They don’t have to be, though. Here are a few tips that will help you anticipate potential money-drains and keep prices down.

1. Be Practical: The sheer number of potential checking account fees is indicative of the myriad services they offer, ranging from ATM withdrawals to paper statements to international wire transfers. You likely won’t need them all, so it’s best to shop for a checking account with your past usage patterns in mind and focus on whichever fees will actually be relevant to you.For instance, will you need a physical checkbook or paper statements? Will your transactions require frequent access to your local bank branch? How often will you need to withdraw cash from a non-bank-owned ATM? Let the answers to such questions guide your selection and dictate which fees to focus on minimizing.
2. Comparison-Shop: Many consumers enter the shopping process with preconceived notions about their ideal bank as well as its size and services. However, that limits one’s choices to a particular bank’s offers, which may not be the most suitable for the customer’s needs. The best way to find the right checking account is to compare different offers and services from multiple banks and credit unions, large and small. The goal should be to find an institution and account that meet the majority of your needs. With those in hand, additional amenities and functions won’t matter.
3. Forget About Debit Card Rewards: Don’t let debit card rewards bias your search for a checking account. Not only are debit card rewards far less common than they were before the Durbin Amendment took effect, but credit card rewards are also up to four times more lucrative. So, if you really want spending-based perks, get a rewards credit card with a high earning rate on your biggest everyday expenses.
4. Carefully Review Account Terms Once you've identifie the account that you feel will best suit your needs (or even narrowed down your options to a few finalists), pore through the account agreement(s) with a fine-tooth comb. This is tedious work, but it can pay huge dividends by revealing restrictions and fees that you might otherwise be unaware of prior to experiencing them directly.
5. Build a Financial Arsenal: Although checking accounts are quite versatile — allowing consumers to receive direct deposits, make debit card purchases, pay bills online and access cash on demand — they cannot be used for everything. An attractive savings account or credit card could fill the gaps. Supplementing your checking account with other such types of financial products will enable you to easily and efficiently manage your finances.

Detailed Findings

Below you can find a complete breakdown of all the accounts that were evaluated in this report, grouped by consumer segment.

Best & Worst for Old School Consumers

Best & Worst for Young Consumers

Best & Worst for Cash Strapped Consumers

Best & Worst for Everyday Joe Consumers

Best & Worst for International Consumers

Methodology

 

In this study we analyzed checking accounts with an online application component for 30 of the largest consumer-facing U.S. banks in terms of total asset volume, as reported by the FDIC, plus 5 of the largest credit unions. Where institutions offered multiple checking accounts, we reviewed all relevant accounts and presented the costs of the most affordable option for each scenario, assuming it met the following criteria:

a.) Must be available to all consumers (must not require a minimum opening deposit over $2,500, or be for students or seniors only)
b.) Must provide all of the services (including check writing) that would be necessary to meet the needs of each scenario

It is possible that consumers with usage patterns similar to those in our scenarios would benefit from alternative account offerings, or by combining overdraft protection with either a line of credit or a linked savings account at many of the institutions reviewed. We therefore decided to add alternative checking accounts (accounts that do not allow check writing or decline overdraft transactions) to the mix this year in order to show how consumers can reduce the cost of everyday banking if they are willing to forgo some of the features offered by traditional check accounts.

All account information collected was current as of August 18, 2017.

Usage Patterns for Consumer Profiles

The goal of this report was to compare the cost structure of different banks across a number of theoretical consumer usage patterns. However, these profiles are not meant to mimic the particular usage patterns observed by any one bank or even to follow the average transactions of all checking accounts. Instead, we tried to capture a wide range of usage patterns and key fees in our profiles.

Where possible, we did use existing research to inform our methodology. For example, overdraft fees are one of the most costly expenses that checking-account consumers can encounter. We therefore wanted to illustrate the cost of multiple overdrafts without over representing their cost or associated risk. In creating our “Cash Strapped” profile, we relied on data from June 2014 CFPB report that stated: "…a relatively small number of account holders are responsible for most overdrafts, with 8.3 percent of account holders who overdraft more than 10 times per year responsible for 73.7 percent of overdraft fees. A majority of accounts, 69.8 percent, do not incur any overdrafts, and 82.3 percent of accounts incur 3 or fewer overdrafts." Additionally the report lists that the average annual charge for overdrafts alone for this consumer segment to be $380.40. This data helped inform our decision to include 12 transactions annually that resulted in Customer C’s account balance dropping below $0; six debit transactions and six check or ACH transactions. It also lead us to leave three of the five total scenarios free from all overdraft fees.

We also tried to represent a variety of transaction types and key fees that consumers might encounter, depending upon one’s financial profile and banking patterns. Below we have listed the description of each profile as well as the specific transactions that composed the calculations.

Old School: Uses her checking account in a traditional manner and wants in-branch service. Her primary use of the account is to pay bills by check. She uses her credit card instead of a debit card for purchases. She goes to her own bank to withdraw cash once a week (never uses another bank’s ATM), keeps a minimum balance of $5,000 in her account and uses direct deposit. She manages her account with a paper statement.

Transactions: 1 monthly maintenance fee (if applicable), no third-party ATM fees, no online bill pay, 8 checks written per month, no overdrafts, no wire transfers, paper statements, credit card purchases.

Young: Is a modern consumer who uses his account primarily to pay bills online, make debit-card purchases (9 per month), and retrieve money from ATMs. He typically looks for in-house ATMs but occasionally needs to access another bank’s terminal. He has direct deposits $3,000 per month. His account occasionally dips below $100, leaving him with insufficient funds to pay for debit-card purchases a few times a year. Because he did not sign up for debit-card overdraft protection, those transactions are denied at the point of sale and he is not charged an overdraft fee. He manages the account online.

Transactions: 1 monthly maintenance fee (if applicable), 1 out-of-network ATM withdrawal per month, pays all bills online and doesn’t write checks, 9 debit card purchases per month, 5 debit card NSFs per year, online statements only, uses debit card 9 times per month.

Cash Strapped: Uses her bank account to help manage monthly cash flow. She deposits her checks as they come in (no direct deposit) and her account frequently dips below $0.00. Customer C opts-in to debit card overdraft and pays overdraft fees so that her bills and purchases are covered until her next pay check. Four times a year her balance remains below zero for 5 to 10 days, during which time she incurs additional “extended” overdraft fees from some institutions. Because she is often low on funds, she does not have a line of credit or a savings account to cover the overdraft transactions when they occur. She also uses the account for other banking features such as ATM access, online bill pay and check writing. She typically looks for in-house ATMs but occasionally needs to access an ATM from another bank. She receives both online and paper statements and uses her debit card 9 times a month.

Transactions: 1 monthly maintenance fee (if applicable), 1 out–of-network ATM withdrawal per month, bills paid online, 2 checks written per month, 9 debit card purchases per month, 12 overdrafts per year (6 debit card, 6 checks), opts-in to debit card OD without line of credit, triggers extended OD fee 4X (2X 5 days and 2X10 days), online and paper statements.

Everyday Joe: Has direct deposit of $3,000 per month and uses the account for the typical features: ATM withdrawals, online bill pay and check writing. He typically looks for in-house ATMs but occasionally needs to access one at another bank. Occasionally, he unknowingly runs his account below $0 but does not have overdraft. He pays bills online and writes checks. He receives both online and paper statements, and he uses his debit card 17 times per month.

Transactions: 1 monthly maintenance fee (if applicable), 1 out–of-network ATM withdrawal per month, 3 check/ACH overdrafts per year, does not opt-in to OD, bills paid online, writes 4 checks written per month, paper and online statements.

International and on the Move: Has family overseas and travels one month out of the year to visit them. He primarily uses his account to pay bills and send money to his relatives overseas. He has a direct deposit of $4,000 per month and does not allow his account balance to dip below $0. He pays his bills online, writes several checks, wires money to his family every other month and uses his credit card to make purchases rather than his debit card. When he travels overseas, he uses an ATM to withdraw funds. He manages his money using an online bank statement.

Transactions: 1 monthly maintenance fee (if applicable), 6 international outgoing wire transfers per year, 5 3rd party domestic ATM withdrawals per year, 4 international ATM withdrawals per year, 3 checks written per month, bills paid online, no account overdraft, online account statements, credit card purchases.

Fee Assumptions
ATM Fees: We did not include the cost of non-owner ATM surcharges in our calculations. To calculate the international ATM charges, we included both the flat international ATM fee and the conversion percentage fee. Conversion fees listed in percentages have been calculated based on the assumption that Customer E withdraws $200 per transaction.

Per Check Fee: Check costs vary according to style. The per check fee we assessed is based on the purchase of the physical checks (not transaction costs which are uncommon). To calculate a per- check fee, we divided the cost of the most basic box of checks by the total number of checks in each box. We excluded “first box free” orders.

Overdraft/ NSF Fees: Include fees assessed when the bank covers a customer shortfall to complete a transaction as well as NSF fees for when the bank does not cover the missing cost. Where we note that the consumer has “opted in” to debit card overdraft, this means they have chosen to have the bank pay for transactions that cannot be completed with the remaining account balance alone (enough money in their account to cover the full amount of the transaction (rather than having such transactions rejected at point of sale). None of our scenarios have overdraft plans that tie a checking account to a line of credit or a savings account. Additionally, we assumed that none of the overdraft transactions happen on the same day, that each exceeds $10.00 and that the amount overdrawn amount is $50.

Online/ Paper Statements: Two of our customer scenarios include both paper and online statements. In cases where banks do not offer customers the option to receive both, we assumed that the consumer would choose to receive a paper statement. All applicable fees were taken into account.

Wire transfer fees: When an online wire transfer fee was available, we chose to use that fee over a branch fee for customer E.

Interest bearing accounts: We applied the APYs offered by these types of accounts to the balance assumptions for each scenario. We then used the amount yielded to offset the total monthly cost for the respective scenarios.

NOTE: We have only used on-going fees and features related to accounts. For example, an offer for a free checkbook or limited-time bonuses (APY or cash) are reflected into our total cost assessment.

In our cost difference and average annual costs analysis we used only bank and online accounts data given credit unions membership requirements and small geographical footprint.