No hike in fees for checking accounts
Area banks bucking national trend
Checking account fees have continued to rise nationwide to all-time highs, according to a new survey, but local banks say they haven’t changed their fees and don’t plan to anytime soon.
The study by Bankrate.com found that monthly service fees and minimum balance requirements for interest- bearing checking accounts hit record highs, while bounced-check and ATM fees also increased. On the other hand, average fees and balance requirements for non-interest checking fell, in part reflecting the growth of free checking accounts nationwide.
“In today’s uncertain economic environment when every dollar counts, it is more important than ever for consumers to be vigilant about avoiding bank fees,” said Bankrate senior financial analyst Greg McBride.
Consumer advocates have feared that banks would raise their fees to boost profits and cash during the current credit and financial crisis. But in Western New York, officials at M&T Bank, Bank of America, Lake Shore Savings Bank, Northwest Savings Bank, Five Star Bank, Cattaraugus County Bank and Bank of Akron all said their fees have not changed, and they have no plans to do so.
Bank of America did raise its overdraft fee to $25 from $20 in April, and state-chartered banks are seeking state approval to allow an increase in “returned- check” fees. The state currently caps such fees at $10, but there is no such limit for nationally chartered banks, which state banks say creates a competitive disadvantage.
However, such moves were unrelated to the financial crisis. “That was business as usual,” Bank of America spokeswoman Diane Wagner said.
The continual rise of bank fees has become a growing sore spot for many consumers, who complain they’re being nickel-and-dimed on every product and service, and increasingly question if the fees are in line with the banks’ costs.
“Those increases are totally unfair,” said Ken McEldowney, executive director of San Francisco- based Consumer Action. “Checking accounts are so automated these days that if anything it costs less to provide a checking account now than in the past. There’s just no justification at all whatsoever for the increase in fees.”
Fees are attractive to banks because they’re a more stable — and indeed growing — revenue source than interest income from loans, especially in the current financial crisis. According to a report by the U. S. Government Accountability Office, about 27 percent of banks’ revenues came from fees in 2006, up from 24 percent in 2000.
The GAO report said consumers paid more than $36 billion in checking and savings fees in 2006, with average fees for overdrafts, returned items and stop payments rising by 10 percent or more since 2000. Lake Shore Savings Bank, for example, has boosted its profits for the past few quarters, largely because of its new fee-based overdraft protection service.
Banks say they have to charge the fees to compensate for expenses, especially the cost of maintaining branches and ATM networks. They also say the so-called “penalty” fees are necessary to deter bad behavior.
But critics say banks are really just padding their bottom lines, reaping billions of dollars a year in such account fees. Overdraft and ATM fees in particular have been denounced as abusive by consumer advocates and other critics. And the GAO report questioned whether consumers are aware enough about fees.
In its 19th annual checking study, Bankrate surveyed one interest checking account and one non-interest checking account at each of the largest banks and thrifts in each of the 25 large markets. A total of 247 interest accounts and 226 non-interest accounts at 249 banks and thrifts were studied. Bankrate also looked at 22 online checking accounts at 18 banks.
The firm found that ATM surcharges on noncustomers rose nearly 11 percent to an average of $1.97, with nearly all machines imposing fees. Meanwhile, the fee banks charge their own customers for using another bank’s ATM rose 17 percent to $1.46, putting the total cost of using another bank’s ATM at an average of $3.43.
Ten years ago, the two fees were 89 cents and $1.08, respectively, or $1.97 in total.
Monthly service fees on interest checking peaked at an average of $11.97, up 2.1 percent. Customers deposit an average of $376.75 to open such accounts, and must maintain an average minimum balance of $3,461.84 to avoid fees, a 4 percent increase. That’s more than doubled in 10 years, from $1,561.29.
By contrast, non-interest checking fees hit a new average low of $1.93, while average balance requirements fell to a low of $109.26, down from $155.49 last year and $483.75 in 1998. The minimum opening balance fell to $82.71 from $83.02.
Online accounts pay higher interest than branch-based accounts — averaging 2.06 percent versus 0.24 percent — but they are still costly, the survey found. Average monthly fees for online interest checking accounts is $4.38, while the average overdraft is $28.71, similar to regular accounts.
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