For Many Bank Customers, Inertia Compounds Costly Fees


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Around a third of Americans who have a bank account (33%) wouldn’t switch banks because of monthly account management fees, no matter how much they cost, according to a NerdWallet survey. This follows a recent NerdWallet analysis that found that checking and savings account maintenance fees combined could cost a person $12,648 over their lifetime.

The NerdWallet survey of more than 2,000 U.S. adults, conducted online by The Harris Poll in June 2018, asked Americans how willing they are to pay monthly management fees on their financial accounts and the maximum amount they’re willing to pay. It also asked about the monthly fee amount that would make them switch banks.

Key findings

  • The magic number for switching banks is $16.30: Of the two-thirds of American bank account holders (67%) who would switch banks because of monthly account management fees, the average monthly fee for a single account that would make them take the plunge is $16.30.

  • The younger the generation, the less sensitive to fees: The average monthly account management fee that would cause millennial bank account holders to switch banks is significantly higher than it is for their older counterparts ($19.10 versus $15.80 among Gen Xers, $13.20 among baby boomers, and $11.60 among the silent generation).

  • More than half of Americans don’t want to pay monthly management fees on investment accounts: Fifty-two percent aren’t willing to pay fees for a workplace retirement account, and 53% aren’t willing to pay fees for their IRA or brokerage accounts. Even more aren’t willing to pay monthly money management fees on their checking (62%) and savings accounts (66%).

Attitudes about fees may not be entirely realistic

Bank and investment accounts often come with monthly costs, some of which are avoidable and others that aren’t. For example, checking and savings accounts may come with monthly maintenance fees that are easy to dodge, while workplace retirement accounts and IRAs generally come with expense ratios no matter how savvy the investor.

Americans, on average, are OK with paying small monthly money management fees for investment accounts, bank accounts and financial advisor services.

Still, a large chunk of Americans aren’t willing to pay any monthly money management fees for various financial accounts. Over half aren’t willing to pay those fees for a workplace retirement account (52%) or an IRA or brokerage account (53%). More than 3 in 5 Americans aren’t willing to pay those fees on a bank account — 66% aren’t willing to pay them for a savings account, while 62% aren’t willing to pay them for a checking account.

This isn’t always realistic. Bank fees can be avoided if you follow a bank’s rules to get the fee waived or opt for a free checking and savings account, but investment fees aren’t so easy to sidestep.

“If you’re investing for retirement, you’re probably paying expense ratios. Unfortunately, our analysis found that these are also the most expensive fees, especially over time,” says Arielle O’Shea, NerdWallet’s investing and retirement specialist. “These costs are charged by nearly all fund investments, so while they’re difficult to avoid, investors can reduce these fees by choosing low-cost funds.”

Some are willing to pay too much for bank accounts

Switching banks isn’t high on the list of fun things to do with your time, but it can be a good idea for customers paying high monthly fees on their accounts. Of the two-thirds of American bank account holders (67%) who would switch banks because of monthly account management fees, on average, the monthly fee on a single account that would make them switch is $16.30. For Americans banking at a typical brick-and-mortar bank, they may be paying slightly more than this on a monthly basis, but for both checking and savings accounts combined. According to NerdWallet’s analysis, the median monthly maintenance fees for a checking and savings account at one of the five biggest banks is a total of $17.

More than a quarter of American bank account holders (26%) would switch banks due to a monthly account management fee of less than $10, but the good news is that checking and savings account maintenance fees are entirely avoidable. Despite that, the largest proportion of bank customers likely to stick around no matter what the fee are those with the lowest household income (and therefore, the least money to spare): 37% of Americans with a household income of less than $50,000 wouldn’t switch banks no matter what the monthly account management fee is, compared to 31% of Americans with household incomes of $50,000-plus.

Regardless of income, consumers today have little reason to stand for maintenance fees on their bank accounts.

“Consumers looking to reduce their monthly banking fees have a lot of options: From online banks to credit unions to traditional brick-and-mortar banks, you can compare the fees, interest rates, and convenience factors before making the right choice for you,” says NerdWallet’s banking expert Kimberly Palmer. “While making the switch and updating your automated payments and direct deposits can be a hassle, it’s worth it to avoid paying monthly fees — the savings really add up over time.”

Willingness to pay fees varies by age, gender

Members of the youngest adult generation (post-millennials) are significantly more willing to pay monthly management fees than the oldest generation (the silent generation — ages 73-90). Almost three-quarters of post-millennials (71%) are willing to pay these fees on a workplace retirement account, compared to just over one-fifth of the silent generation (21%). Similarly, more than four times as many post-millennials than members of the silent generation are willing to pay the fees on a checking account (66% versus 15%).

Younger generations also appear willing to pay significantly higher management fees, on average, than their older counterparts. Post-millennials are willing to pay roughly double what the next youngest generation (millennials — ages 22-37) would pay for financial accounts, though this could be because they’ve probably had these types of accounts for a shorter time and aren’t sure how much they should reasonably cost in monthly fees.

Younger Americans would also put up with higher bank fees than older Americans would before switching banks. Post-millennial bank account holders* would change banks if they were charged monthly fees of $30.80, on average, almost triple what the silent generation would change banks over ($11.60).

Men and women also differ in terms of price sensitivity to financial costs and willingness to pay monthly money management fees. A larger proportion of men than women are willing to pay these fees for investment accounts — half of men would be willing to pay them on a workplace retirement account (compared to 46% of women), and half would be willing to pay them on an IRA or brokerage account (compared to 45% of women). But a slightly larger proportion of women than men are willing to pay such a fee for their checking account (40% versus 37%).

On average, men are also willing to pay higher monthly fees on various financial accounts than women.

Men and women who would switch banks because of monthly management fees have slightly different fee amounts that would cause them to make the jump. Among those with a bank account, men would change banks if they were charged an average monthly fee of $16.90, while women would switch for an average fee of $15.80.

Consumer takeaways

Get to know the fees you’re paying. Based on how much Americans say they’d be willing to pay for money management, they may be overestimating what’s reasonable to pay for bank fees and underestimating what’s realistic for investing fees. Use NerdWallet’s 401(k) fee calculator and mutual fund expense ratio calculator to figure out how much your investment accounts are costing you, and check out NerdWallet’s study on the lifetime cost of financial fees to learn how to reduce or eliminate them.

Switch to a more affordable bank now, instead of continuing to pay unnecessary costs. Switching banks can take a bit of time, but by opting for an online bank or a credit union with free checking and savings accounts, you can eliminate your monthly fees and maybe earn higher interest on your savings as well. Palmer has advice on how to make this process easier.

“You first want to choose the best bank for you by focusing on where your money would earn the highest interest rate while being subjected to the fewest fees,” she says. “Once you’ve made your selection, then it’s time to open up your new account. Next, you want to closely review your old account to make a list of any automatic payments and deposits so you can transfer them all over to your new bank. Once everything is transferred over, you can close your old account, and you’re all done.”

If your bank is charging you to hold your own money, there are better options for you. Figure out how much your bank is costing you over a lifetime by using NerdWallet’s cost of bank fees calculator. It may be the motivation you need to make the switch.

Post-millennials and millennials, examine the costs of your bank account and don’t stick with an account just because you’ve always had it. Younger Americans are less price sensitive to fees, according to the NerdWallet analysis, which can make them more realistic when it comes to the costs of investment accounts, but it may also make them overpay when it comes to bank fees. Again, online banks and credit unions often offer free accounts and higher interest rates, so younger Americans who are paying more because they’re still with the bank they had in high school or college should reassess and consider switching to a new bank.

Survey methodology

This survey was conducted online within the United States by The Harris Poll on behalf of NerdWallet from June 6-8, 2018, among 2,036 U.S. adults ages 18 and older. This online survey is not based on a probability sample and therefore no estimate of theoretical sampling error can be calculated. For complete survey methodology, including weighting variables and subgroup sample sizes, please contact Megan Katz, [email protected].

*Caution, low base size (n=81) — this data should be interpreted as qualitative and directional in nature.

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