11 Nov
2011

Understanding the Common Fees Associated with Each Banking Method

devider

Tired of false claims being made by banks offering “free” checking accounts? While it’s true that most main stream banks do not require monthly service fees for most checking accounts, they don’t end up really being “free” if you ever overdraw your account. Banks will often impose hefty overdraft fees that sometimes result in a negative bank balance that will keep accruing more fees until your account is returned to a zero or positive balance, costing Americans billions of dollars annually. Not to mention, the lack of faith many Americans have in our traditional financial institutions. Ever since bankers accepted large bailouts from the federal government, and dozens of others have gone out of business and/or been acquired, it is no wonder that so many Americans have turned to alternative financial products such as, check cashing and prepaid debit cards, as their preferred financial partner.

According to Credit.com, millions of “unbanked” consumers in the U.S., a segment of the population that earns over $1 trillion in annual income, pay out over $1.5 billion annually in check cashing fees. Check cashing fees are usually 1% to 3% of the total amount cashed and are considered a service fee for being able to provide the consumer with cash quickly. While check cashing has been popular for many people who wish or cannot bank with traditional institutions, many people have recently began using prepaid debit cards as a solid alternative product to traditional checking cards.

Prepaid debit cards are especially great for people with bad or limited credit history, as they require no credit or ChexSystem checks, in order to be approved for a debit card. Prepaid debit cards also protect consumers against large overdraft or non-sufficient fees, by never allowing customers to spend over the amount of funds that have been pre-loaded onto their debit card. They also allow consumers to track their spending and have access to bill pay online, and most importantly, help people rebuild good credit, whenever they make debit card purchases. There are still fees associated with prepaid debit cards, so it is always recommended to read and understand the terms and conditions thoroughly, before using any financial service, whatever it may be.

Traditional Checking Account (not linked to a credit or savings)
Check Cashing Service
Pre-Paid Debit Cards
Pro’s
  • No hidden fees or money access fees
  • No minimum balance
  • No minimum transactions per month required
  • Free or reduced checks
  • Being able to conduct bill pay and other online banking services
  • Immediate cash, no waiting for money
  • One-time check cashing service fee (as opposed to monthly maintenance fees)
  • No credit check or ChexSystem used
  • No ability to “overspend” more than you have available in your account
  • Builds good credit using your money
  • Online access to funds
Con’s
  • Average fee of $25 or more each time your account is declined for a withdrawal
  • Negative bank balance charges continual fees for having a negative amount on a daily or weekly basis
  • Must pass a ChexSystem check, in order to open up a checking account
  • 1% to 3% fee of total check cashed
  • No spending monitoring or transaction history
  • Having to hang on to large amounts of cash
  • Questionable security environment
  • Different products have different fees associated
  • Fees are sometimes hidden or hard to find

Comments are closed.