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The Best Answer to Rising Bank Fees

Dan Caplinger
August 14, 2012

Many people never start investing because they have trouble coming up with any money to save. But the real challenge comes after you start saving, because you'll always find financial institutions trying to take their cut of your money.

Chief among the casualties of the financial crisis were the reputations of banks, especially big Wall Street institutions. After getting taxpayer-funded bailouts, banks have repaid their customers by making a host of customer-unfriendly moves, including tightening loan requirements and boosting fees. And as banks work increasingly hard to try to lock in profits, those anti-customer measures are just getting worse.

The long and the short of bank fees
A recent survey from provides some hard numbers behind the trend toward higher fees. The average cost of monthly fees that banks impose rose above $12, jumping more than 7% just since the end of 2011. ATM fees have also risen, while the average fee for overdrafts is rapidly approaching the $30 mark.

Traditionally, customers with a bit more money could expect to get preferential treatment, including waivers of certain fees. Yet it's getting more costly to earn those perks as well, with the average amount you need to keep on balance to avoid monthly fees rising more than $850 to almost $4,450. Just over 35% of all accounts qualified for free checking, down from almost 39% six months ago.

Even opening an account in the first place is getting harder for many cash-strapped customers. Minimum opening balances rose by more than 4% since the end of 2011, jumping above the $400 level on average.

Haves and have-nots
The key to navigating the bank-fee environment is to realize that not all banks are created equal. Depending on where you live and what types of banks are available to serve you, you can often find a good deal.

One big distinction comes from big banks versus smaller rivals. According to the survey, average monthly fees were more than 40% higher at big banks than at small ones, and small banks had more than twice the percentage of free checking accounts that big banks had.

When you consider the relative financial hits that different parts of the banking industry took during the financial crisis, that bias toward higher fees at big banks makes plenty of sense. Many of the surviving small banks from the financial crisis got through the mortgage meltdown in a lot better shape than Bank of America (NYSE: BAC  ) and Citigroup (NYSE: C  ) did with their much larger loan portfolios. Moreover, many big banks, including B of A, Wells Fargo (NYSE: WFC  ) , and JPMorgan Chase (NYSE: JPM  ) , ended up acquiring other troubled financial institutions during the crisis, inheriting or adding to their own woes.

Those big hits left those