Dive Brief:

• The average cost of overdraft fees in the U.S. rose by 22 cents over the past two years, hitting a record average of $33.58, according to a Bankrate survey released Wednesday. The survey included 245 banks and thrift institutions across 25 U.S. markets.
• The average minimum balance required to avoid monthly service fees on an interest-bearing checking account has ballooned 31% over the past year, to $9,896.81 from $7,550.42 last year — a record at the time, the survey found.
• However, the average surcharge for using out-of-network ATMs fell for the fourth straight year, to $1.51 — a 10-year low. That cost generally combines with a separate ATM surcharge that averages $3.08, a figure that has remained steady over the past year. Atlanta carried the highest average total ATM fee of $5.23, according to the survey. Los Angeles had the lowest at $3.90.

Dive Insight:

Despite the scrutiny of politicians and the efforts that some banks are making to forgo overdraft fees, the average cost associated with the controversial banking practice of charging customers for withdrawals exceeding their checking account funds is on the rise.

The average cost of overdrawing a checking account in the U.S. increased from $33.47 to $33.58 over the past year, the Bankrate survey found.

That figure varies among the surveyed metropolitan areas, from $35.70 in Philadelphia to $30.42 in Cincinnati.

Bankrate's chief financial analyst, Greg McBride, advised users, in the report, to keep close tabs on their account balances.

"Put in a line of defense by establishing a link between your checking account and savings account at the same bank so that money is immediately transferred into the checking account to cover any shortfall," McBride said. "An increasing number of fintech companies and neobanks are offering accounts that do not charge overdrafts and are worth considering for those with more than the occasional overdraft."

A number of financial institutions have debuted overdraft alternatives over the past year — or jettisoned the fees altogether. Ally Bank discarded overdraft fees in June, as did Alliant Credit Union in August.

Citizens Bank this month introduced technology that alerts users to overdraft withdrawals — a feature akin to PNC's "low cash mode," an offering — announced in April — that gives the bank's customers a 24-hour buffer before overdraft fees are charged.

TD Bank, which the Center for Historical Lending reported took the largest percentage of its operating revenue from deposit service charges of any bank with more than $100 million in assets, in June unveiled a deposit account that does not allow customers to overdraw funds and does not have a minimum daily balance requirement.

Columbus, Ohio-based Huntington Bank in June launched a digital-only loan product that would give eligible customers immediate access to a line of credit up to $1,000 with no interest or fees if they sign up for automatic payments. San Antonio-based Frost Bank debuted a feature in April allowing customers to overdraw their checking accounts on transactions up to $100.

Despite the growing raft of workarounds, banks took in nearly 40% more in overdraft fees in 2021’s second quarter than they did in the same three-month span a year earlier, S&P Global Market Intelligence reported in August. That total, however, is 32.8% less than banks lined up in 2019’s second quarter.

Just because the alternatives exist doesn't mean they're free, though. About 48% of non-interest-bearing checking accounts have no attached fees, Bankrate found — a figure that dips to 7.6% for interest checking accounts.

Two of the most recently launched overdraft alternative products — Regions Now Checking and Bank of America's Balance Connect — have maintenance fees attached. The former charges a flat $5 monthly fee and links a user's Regions accounts to provide overdraft protection without transfer fees. The latter ferries money from another of the user's Bank of America accounts to an overdrawn one for a $12-per-transaction fee.

The average monthly fee for interest-bearing checking accounts that have those costs attached is a record $16.35, Bankrate found. For non-interest checking accounts, that figure is $5.08, a seven-year low, according to the survey.