What does your bank account cost?
It pays to check.
By Mary Beth Franklin
Maturity News Service
The recent announcement by the First National Bank of Chicago that it
would charge its banking customers $3 every time they used the services of a teller
triggered angry reactions from consumers around the country.
But the Chicago bank is not alone in raising service fees in order to
direct customers toward less-expensive automated services. Many banks have been quietly
raising their fees and instituting new ones for several years now.
A recent study by the U.S. Public Interest Research Group (PIRG) found
that between 1993 and 1995, consumer bank fees rose 10 percent or more, about twice the
rate of inflation. During the same period, commercial bank profits broke new records,
according to the Federal Deposit Insurance Corp.
In some cases, those interest-bearing checking accounts where you stash
your cash for safekeeping and convenience could actually be costing you money in the long
run after the annual fees and service charges are deducted.If you haven't done so lately,
it may be time to review your bank's services and costs and see if they are really in your
best interest. If they're not, shop around for a bank that offers you a better deal.
The PIRG study found that the annual cost of maintaining an
interest-bearing checking account (also known as a NOW account) grew 11 percent from 1993
to $219 in 1995. Inflation during the same period averaged 5.5 percent.
The annual cost of maintaining a regular checking account grew by 10
percent to $202 over the same period. Average monthly balance requirements to avoid
regular checking fees rose 30 percent to $1,242 in 1995.
The study concluded that banks in Maryland, Florida, the District of
Columbia, North Carolina and Illinois imposed some of the highest fees in the country.
Some of the lowest-cost banks were located in Hawaii, Idaho, New Mexico, Maine and
Washington, according to the report.
"We recommend that consumers shop around," said Janice
Shields, a PIRG consultant and coauthor of the report. "And look around for a bank
that offers tied accounts, "which means if you keep a certain minimum balance in your
savings account, you may not have to pay fees on your checking account."
Shields noted that shopping around is particularly important to
certificate-of-deposit investors, since interest rates on CDs are one of the most
competitive areas of the banking industry. Here are some other tips for consumers to keep
- Pay attention. Banks do not announce new fees or fee hikes in red
letters. Often it comes in fine print stuck in with your bank statement. Take the time to
read it. For example, bounced check charges now average $20, up from $15 a few years ago.
And two-thirds of the nation's banks charge customers for innocently depositing someone
else's bad check. This particularly annoying charge is called a Deposit Item Returned
- If you get stung with what you consider outrageous or unfair bank fees,
complain. Sometimes the bank will waive them in the name of good customer relations. The
same holds true for banks that issue your credit card. Ask the issuing bank to waive its
annual fee, lower the interest rate or both. You may be surprised at the response. If you
don't like the answer, there are plenty of other banks to choose from.
- Comparison-shop. Banks are constantly changing their fee structures.
Compare the costs of your account to those of other banks in your area. Know what types of
transactions you regularly make and evaluate accounts with your needs in mind. You may
find a better deal at a different bank.
- Consider a credit union. Credit unions offer federally insured deposits
but generally charge lower fees than commercial banks. Many companies, unions, state and
local governments, and communities have credit unions that you may be eligible to join. Of
course, you must weigh the issue of fees with other factors such as convenience, financial
stability and quality of service.
- If you use automated teller machines frequently, look for a bank or
credit union with plenty of ATM machines. Most institutions don't charge you if you use
their own machines, but may slap you with hefty fees usually $1 per transaction, if you
use an affiliate's machine on the ATM network.
- Check out minimum balances. Find out how the bank figures the balance.
Some use an average daily balance approach, but others use the low-balance method, meaning
if your balance drops below the minimum for even a single day, you get hit with account
fees and probably lose any interest due to be paid for the period.
- Also ask what the bank counts toward the minimum balance. Some banks
count savings along with the checking and some even count CD deposits.
- Consolidate accounts and services. The more types of banking you do at
one institution, the more likely you'll receive discounts or special deals. For example,
if you keep minimum check and savings balances, you may be eligible for loan discounts,
higher CD rates or no-fee credit cards. Also ask if your bank offers any special discounts
for senior citizens.