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Overdraft, ATM fees bounce a little higher

Banks are relying on charges more as income source

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Associated Press / April 19, 2006

NEW YORK -- The cost of overdrawing your checking account has gone up again, according to a study of bank fees released yesterday.

Bankrate.com said a survey 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, said Bankrate.com, an online financial information service that's 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 the ''one bright spot" was that banks have reduced the amount they charge their customers who use ''alien" machines. The average fee dropped to $1.29 from $1.37.

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

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

As a result, financial institutions have become more dependent on such fees to generate profits. Wachovia Corp. of Charlotte, N.C., 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 the 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.

The survey also compared checking accounts at online banks and brick-and-mortar 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.

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