NEW YORK — Consider the $5 debit card fee a mere warning shot.
When Bank of America announced its plan to start charging customers for debit card purchases, it was a wake-up call that banks are hunting for ways to boost profits.
The public outcry over the fee ultimately caused Bank of America and some of its competitors to abandon their plans. But that doesn't mean the industry is done tinkering with checking accounts, which have already been significantly revamped in the past year.
"The market at the moment is very experimental," says Bob Meara, a banking analyst with the consulting firm Celent. "The standard checking account now comes with many options, which consumers would be well advised to examine if they want to avoid fees."
The changes come as new regulations sharply limit how much banks can make from checking accounts. And the stakes are high. A regulation that took effect in October caps how much banks can collect from retailers whenever customers swipe their debit cards, curtailing some $16 million in annual revenue, according to the Federal Reserve.
Banks aren't about to simply surrender those profits. That means you'll need to be more vigilant about avoiding fees.
Here's what to watch:
Monthly fees are undoubtedly rising: Bank of America, Chase and Citibank all hiked basic checking account fees this year. The good news is that banks are still giving customers ways to get around those fees.
In fact, 92 percent of checking accounts waive fees for customers that meet certain conditions, such as setting up direct deposit. That's up from 88 percent a year ago, according Bankrate.com. So if you're paying a monthly fee, call your bank to see if another account might better suit your needs.
For instance, you may have previously opted for premier checking to earn interest on your account. But premier accounts require higher minimum balances of $10,000 or more to avoid monthly fees.
If your balance falls short even once or twice a year, a $25 monthly fee could quickly negate any minimal interest earned. The other perks that accompany premier checking accounts — such as waivers for out-of-network ATM fees — may not make up for those monthly fees either.
With a basic checking account, by contrast, most major banks will waive the fee if you set up direct deposit or keep a balance of at least $1,500. If you can't meet those conditions, there may still be other ways to get free checking. Bank of America, for example, offers free accounts to customers who receive paper statements and do all their banking online or at an ATM.
If your bank doesn't have an account that qualifies you for a fee waiver, cast a wide net in your search for an alternative.
Online banks, credit unions and community banks offer fees and terms that tend to be more forgiving. At the Pentagon Federal Credit Union, for example, a balance as low as $500 will exempt you from the $10 monthly fee.
The majority of the free checking accounts with no strings attached offered by banks are primarily found at local and regional banks, according to Greg McBride, senior analyst with Bankrate.com.
The sales pitch for overdraft programs can be compelling: Opt in for overdraft protection, and you'll guard against the potential embarrassment and inconvenience of having a transaction denied at the register. This is the spin you'll get from banks now that they're required to obtain consent before enrolling customers for overdraft protection.
But consider the potential costs of this so-called "protection."
A single overdraft can trigger a fee of $35 at many banks, even if the bank is covering just a small amount. And that's not where the charges end; each successive purchase can result in an additional $35 fee. Some banks cap the number of times you can be charged to about five times a day. But even then, that's $175 in penalty fees alone. Fail to bring your account into balance after seven days, and you could be charged yet another fee.
If you nevertheless feel you need some type of safeguard, consider linking your accounts, whether it's a credit card or savings account. The fee per overdraft is usually far cheaper at around $10 or $12. There's also no risk of an extended overdraft fee since the funds are covered by the transfer from the linked account.
Regardless of your choice, the potential cost of an overdraft should remind you to regularly review your account online. This also enables you to spot any fraudulent charges early on; it will also help build awareness of your spending habits.
Banks are quietly hiking a host of other fees as well. These are for services that don't get as much attention, but may still irk you when you need a money order or lose your debit card.
TD Bank, for example, this month raised fees on a variety of service fees. Wire transfers now cost $15, up from $10, and a stop payment fee is $30, up from $25. In September, Bank of America began charging $5 to replace a lost debit card, with rush overnight service costing $20. Both services had previously been free.
If you're still getting paper statements, it's worth checking to see how much the service is costing you.
"If you agree to accept a statement electronically, more banks are offering a fee reduction or waiver," notes Beth Robertson, director of payments research at Javelin Strategy & Research. If a bank charges $2 per statement, that's $24 a year.
The catch with these ancillary fees is that banks often don't make them easy to find online. That's despite the fact that checking accounts can come with as many as 54 additional fees, according to a study by The Pew Charitable Trusts. That's on top of the most common fees banks typically charge.
So if there's a service you tend to use frequently — such as money orders — call customer service or visit the branch to check how much it will cost you. If it's a fee you incur often, consider shopping around to see if there are banks that offer the service for less or for free.