Millennials and Gen Z are Paying the Most in Banking Fees
- A recent study by Bankrate found that Gen Z and Millennials pay the most monthly banking fees.
- On average, Gen Z and Millennials are paying $19 and $16 per month, respectively, while Gen X and Baby Boomers are paying $4 and $2 per month, respectively.
- The high monthly fees for the younger generations may indicate how banks are taking advantage of those starting their professional careers.
In a recent study by Bankrate, it was found that members of Generation Z and Millennials were paying more in bank and ATM fees than people of previous generations. On average, Gen Z pays around $19 per month in banking fees. Millennials spend a little less at $16, while Gen X pays around $4, and Baby Boomers pay around $2. Per the study, many believe banks are taking advantage of younger people by charging them the most for their online banking.
Why Banks Are Taking Advantage of Members of Gen Z and Millennials?
Many Gen Z and Millennials members are still in their early careers, while many have not started. Thus, as they are still in school or just beginning to work, they are paying for many items related to their education. Consequently, having a lower income level as a college student or a recent graduate may lead to higher banking fees due to not meeting certain requirements in their checking accounts.
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On average, the minimum balance that needs to be in a bank account for it not to incur any fees is $9,896.81. As members of Gen Z are either in school or very early in their professional careers, they are most likely to have student loans that they are trying to pay off. Thus, the high minimum balance imposed by the banks makes it almost guaranteed that the digital natives would have to pay their monthly fees if they wish to continue using their bank account.
Furthermore, another fee that many people pay when using their bank account is overdraft fees. As mentioned before, due to the Gen Z population either in school or just starting their careers, money is tight when paying for their expenses. As a result, sometimes, when using their debit card, their bank balance may become negative, causing them to have to pay overdraft fees.
A similar scenario exists for Millennials as they are also relatively early in their professional careers. On average, it takes around 20 years to pay off student loans, and as Millennials are aged between 26 and 41, they are still in the process of paying off their student loans. High credit card interest rates and balances may also prevent millennials from building wealth.
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This age group is very similar to Gen Z because they are also dealing with paying off their student loans, which makes saving money difficult for them.
As a result, the minimum balance imposed by the banks may be challenging to meet, resulting in them having to pay similar monthly fees to members of Gen Z.
Why Baby Boomers and Gen X Pay Less
Gen X and Baby Boomers pay much less compared to the younger generations. Per the study done by Bankrate, it was determined that Gen X members paid $4 per month for monthly banking fees, and Baby Boomers paid $2 per month. For these respective generations, a couple of factors explain their low fees.
For members of the Gen X generation, who are classified as those between 42 and 57, have been working in their respective fields for a long time. Thus, during the time they have been working, they have completed paying off their student loans and are able to maintain and exceed the minimum balance imposed by the banks. Due to them depositing more funds than the minimum required amount, their bank does not charge them as much as they do for the younger generations.
Moving on to the final generation, Baby Boomers pay the least amount of banking fees per month out of any other age group. There are a couple of reasons why banks charge the Baby Boomers the least amount of money.
The first reason is due to their loyalty. Typically, corporations offer better deals with more incentives to their most loyal customers. Therefore, as Baby Boomers are those whose ages range from 58 to 76, they are most likely to have spent the majority of their adult life with the same bank, leading them to receive better deals that lower their monthly fees.
The second reason is that they have been working for decades in their line of work, similar to Gen X members. As the Baby Boomers are nearing retirement, they have money saved up in the bank, stock market, and from their current job, which helps them exceed and maintain the imposed balance by the bank not to pay higher fees.
Therefore, Gen X and Baby Boomers pay less because they have access to higher income levels, allowing them to meet the balance threshold implemented by the bank. By meeting these requirements, they can pay lower monthly fees on their bank accounts.
This is Why People Stay With Their Banks
During the same study, a survey was conducted that asked the adults the main reason they have stayed with their banks. Out of the 2,181 adults surveyed, 24% said their main reason was low or no monthly fees paid on their bank accounts. However, as mentioned above, Gen Z and Millennials pay the highest monthly fees. Therefore, as bank fees increase, it may cause a portion of these bank account holders to leave their financial institutions.
Issues With Current Banks
Currently, the average overdraft fee is around $33.58, which is the highest it has ever been. Furthermore, in 2019, it was estimated that banks accrued a total revenue of $15.47 billion solely from overdraft fees, These numbers indicate that banks are raising their fees and making it harder for younger people to pay their living expenses if they lack overdraft protection whenever their account balance becomes negative.
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Thus, young people should be looking at other places where they can have a bank account that does not try to charge them for minor things that can significantly impact their financial situation.
Banking with CapWay
At CapWay, there are no hidden fees, nor do you need to have a minimum balance in your checking account. There are no monthly fees. In addition, CapWay does not have overdraft fees, making it easier to hold onto the small portion of the money you get to keep after paying the rest of your expenses. Finally, by choosing to bank at CapWay, you get to keep a higher percentage of your money instead of paying fees to a financial institution.
What are your thoughts on this study? Does it surprise you that older generations are paying less in banking fees?
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