Your Money: Act to avoid bank services fees

— -- Next time Grandma and Grandpa get to reminiscing about the good old days, ask about the time they opened a bank account and got a free toaster oven. Not only that, but they earned a pretty decent interest rate, too.

Those days are long gone. Banks are awash in cash, despite the fact that they're paying pennies in interest. And increasingly, customers are being charged for services that used to be free.

Banks say recent regulatory changes have left them with no other choice. Starting Oct. 1, the maximum fee that banks can charge retailers when customers pay with a debit card is 21 cents, down from an average of 44 cents. The fee cap is expected to cost banks $10 billion a year.

Only 45% of non-interest checking accounts are free, down from 65% in 2010 and 76% two years ago, according to a survey by Fees are going up, too: The average monthly fee for a non-interest checking account is $4.37, up from $2.49 last year. The average fee for an interest-bearing checking account is $14.15, up from $13.04, the survey found.

The good news: There are numerous ways to avoid these fees. Some tips:

•Forget about interest checking accounts. The average minimum balance to avoid fees on interest-bearing accounts is $5,587, vs. $585 for a non-interest checking account, according to Bankrate.

What do you get for keeping such a big chunk of cash in your account? Dandelion fuzz, that's what. The average interest rate for interest checking is 0.08%, according to Bankrate.

•Set up direct deposit. Many banks will waive checking account fees for customers who set up direct deposit of their paychecks. Citibank, which said last week that it will raise its basic checking account fee to $10 from $8, said customers can avoid the fee altogether by making one direct deposit and one online bill payment a month.

•Consider a small bank or credit union. Credit unions and small banks have historically charged lower fees than large banks. That gap could become even wider. The law mandating a reduction in debit card fees exempts banks and credit unions with assets of less than $10 billion.

A survey conducted in the spring by the U.S. Public Research Interest Group found that consumers could find good deals at regional banks and credit unions, says Ed Mierzwinski, consumer program director. Similarly, a Bankrate survey found that three-quarters of credit unions offered free checking, and 96% offered it for account holders who had direct deposit or agreed to receive electronic bank statements.

Steve Troutner, who heads banking products for Citibank's retail arm, says Citi offers conveniences that small banks and credit unions lack, such as free withdrawals at more than 29,000 ATMs. "Credit unions can't make that statement," he says.

•Watch out for debit card fees. Debit card fees are still rare, the Bankrate survey found. Only 4% of banks charge a point-of-sale debit-card fee, and less than 2% charge a monthly fee.

That percentage could increase, though. Wells Fargo and JPMorgan Chase are testing monthly debit card fees in some of their markets. Starting in November, account holders in SunTrust's basic checking account will pay a $5 monthly fee to use their debit cards for purchases.

To avoid the fee, customers must either stop using their debit cards for purchases or upgrade to a "Solid Choice" checking account, which requires a $5,000 daily minimum. Customers also qualify for Solid Choice if they have a minimum of $10,000 in total deposits, which includes checking and savings accounts, certificates of deposit and individual retirement accounts.

Banks are required to notify customers when they change the terms of their accounts. That means it's more important than ever to peruse your monthly statement and letters from your bank. If you bank online, check your bank's website for notices about changes to your account.

"You have to have your antennae up," says Greg McBride, senior financial analyst for Bankrate. "Whether it's e-mail, snail mail or statement inserts, if you're getting any type of notice from your financial institution, it warrants your attention."

Just because your bank hasn't raised fees doesn't mean it won't. McBride predicts a continued decline in no-strings free checking accounts. The good news? Customers will usually be able to find ways to avoid them.

Sandra Block covers personal finance for USA TODAY. Her Your Money column appears Tuesdays. E-mail her at: Follow on Twitter: See an index of Block's columns.