Stern Advice: Prepare to pay more for your checking account

WASHINGTON (Reuters) - Checking and savings account fees have remained pretty stable -- at zero dollars a month for most consumers -- the American Bankers Association bragged recently. But don't expect that to last very long.

Big banks that have seen their ability to profit from overdrafts and credit cards curtailed are looking to make it up on new fees for checking accounts, savings accounts and other bank services.

On Tuesday, yesterday, Bank of America reported that its credit-and-debit card business was worth $10.4 billion less than it used to be, just because it can no longer cash in on big late and overdraft fees. You know it's going to look elsewhere for that income.

"It costs between $150 to $200 to bring in a new customer, and between $200 and $300 to maintain that account annually," says Don Vecchiarello of Bank of America. "There is a cost and a value associated with that account, but we want to give people choices about how they pay for that value."

Translation: It's going to cost you.

"We expect more and more consumers to find it harder and harder to avoid bank fees," says Ed Mierzwinski, director of consumer programs for U.S. Public Interest Research Group.

Those fees will increasingly fall on "good" consumers who have avoided big fees thus far by not doing any of the things that attract penalty fees, like paying credit-card bills late, or overdrawing their checking accounts with debit card transactions.

"There's been a lot of talk about how the regulatory environment we're in now is going to eliminate free checking," said Mark Schwanhausser, a banking analyst with Javelin Strategy & Research. "It's not going to eliminate free checking, it's just going to add asterisks."

Some of those new fees that consumers are noticing include: higher checking account fees; charges for NOT using your home equity line; fees for getting paper statements; fees for downloading data into Quicken or other personal finance software; and the disappearance of refunds that banks used to pay consumers when they were charged for going out of their networks to use an ATM machine.

But consumers do have some choices. They can "walk with their feet" as the saying goes -- switching banks when they are not happy with the services they are getting for the fees they will be paying.

Here are some more pointers for dealing with bank fees.

-- Cast a wide net. When you are looking for banking services, don't limit yourself to the bank on the corner by your office or the big national bank that is everywhere. Compare smaller community, credit unions, Internet-only banks or the megabanks that are household names. Don't just jump for the cheapest account; choose the one that offers services you want at the best price. You can start your search at CheckingFinder.com (www.checkingfinder.com) or Bankrate.com (www.bankrate.com).

-- Don't pay much for interest. Many banks charge more per month for checking accounts that pay interest than they do for interest-free checking. But, hey, have you looked at how much interest you are actually getting lately? It is probably 0.25 percent or less; sometimes way less. So keep the money you need for monthly transactions in an interest-free checking account, if it will help you avoid fees. And worry about moving it to an interest-based checking account when rates rise -- whenever that is.

-- Look for synergies. Many banks will access an annual fee but then exempt you from it if you behave the way they want you to. That might be as simple as getting your paycheck automatically deposited into your account. (But watch that, too: Some banks will hold the check for a couple of days before giving you access to the cash).

You may be able to avoid fees by keeping a few different accounts at the same bank, but compare what you are giving up in interest with what you're avoiding in fees. Keeping a larger-than-usual minimum balance in your account is not so bad for now, either, because there aren't many other places you can go to earn decent rates of interest on your money. Be prepared to change your approach when rates rise.

-- Protect your statements. Most banks and other financial institutions are working hard to move their customers to a paperless environment. They can save a lot of money by NOT mailing you a statement, and banks are now charging consumers anywhere from $3 to $7 or $8 a month if they want to receive a paper statement. But what are you going to do if you get audited by the IRS and can't prove any of your statements? Or if you need to dispute a charge from your bank?

Furthermore, if you have (for example) 30 days to dispute something in your statement, when does that clock start ticking? When the bank posts your statement online, or when you actually see it? The fee-for-paper-statement is a deal breaker for Mierzwinski, who suggests consumers call their banks and ask to get that waived. "If the bank told me I couldn't get my statements, I'd tell the bank I was walking." If you really don't want to pay for the paper statements, get in the habit of going to the bank website on the date the statements are posted and print yours out yourself.

-- Check back in regularly. Sometimes, banks force you to forego statements just to click through to their sites. But you can go to whatever screen allows you to change your account settings, and switch back to paper statements. It's like playing cat and mouse with your bank -- but you should probably get used to it.