Saving a Buck at the Bank

Question of the week:Every time I open my monthly bank statement, I feel like I'm getting taken to the cleaners with all the extra fees and charges. What are your suggestions for avoiding these? --S.J.S.

Dear S.J.S.,

Given that bank fees are at an all-time high, it's no wonder you're feeling the pinch. According to a 2001 study by U.S. Public Interest Research Group, bank customers who don't meet minimum balance requirements pay an average of $228 a year for their checking account, including service fees, account fees, and that most annoying fee of all, ATM surcharges.

When we asked members of the Armchair Millionaire community for tips on cutting bank fees down to size, we received some creative responses. Here are a couple:

The urge to merge. "If you have a loan or credit card balance with your bank, combine the balance with your checking account. This could bump you up into a preferred checking account, which usually has most fees waived. Just be careful when the loans start getting paid down because this will lower your minimum balance." --Chris W.

Bank in your underwear. "Access your bank online and pay as many bills as possible online so that you don't have to replace checks as often." --Phil H.

The obvious first step would seem to be to keep your account balance above the minimum required to avoid most fees. However, by having to keep a particular stash in your checking account, you lose the opportunity to have that money somewhere else--such as in a CD or money market account--where it's likely to earn more than in your checking account. So what you save in fees you lose in interest.

This means that to really save you need to look beyond just keeping the minimum balance. Since banks have so many different fees, it's helpful to have your own bag of cost-cutting tricks. My checklist provides just that.

The Armchair Millionaire Checklist of Bank Fee Cost-Cutting Moves

• Consider a credit union. If you qualify for one, credit unions can save you a bundle in fees. One downside for avid ATM users, however: Credit unions can have smaller ATM networks than many banks, meaning you'll pay more often to use other banks' ATMs.

• Think small. The account fees at smaller, locally-owned community banks tend to be lower than at large regional or national banks. On average, they also require lower minimum balances to avoid fees.

• Look at a "no frills" account. These accounts, which charge a low, flat monthly fee, can be a good deal if you don't do a lot of check writing. They allow you to write up to a specified number of checks, but then charge for each check after that.

• Set up direct deposit. Many banks will waive or reduce checking fees when your paycheck is deposited directly into your account. Check with your employer. If you receive a Social Security check, you can also arrange for it to be direct deposited.

• Limit ATM charges. Plan ahead so that you don't need to drop by an ATM as often, or skip the ATM altogether by getting cash back when you shop with your debit card. When you do need an ATM, stick with ones owned by your bank.

• Get your checks printed elsewhere. There are many printing companies that provide checks for substantially less than what you pay by ordering checks through your bank.

• Shop around. There are still some deals out there, including free checking. Compare carefully, though, to make sure that the offers match what you really need.

THE BOTTOM LINE: No matter how much they get under our skin, bank fees are here to stay. With a bit of forethought, however, you can keep them under control.