The final fee: Some banks
make you pay to close an account
By Michelle Samaad • Bankrate.com

At some banks, it's going to cost you not to do business with them.

In the latest round of fee mania, some banks -- mostly large, billion-dollar institutions -- are charging customers to close their checking accounts.

It can cost as much as $10 to close an account, on top of any monthly fees, according to a recent Bankrate.com survey of the nation's top 10 banks, thrifts and credit unions.

What gives?

Fees are needed because it's expensive for banks to offer free or basic checking accounts, banking experts say. Competition from brokerage houses and consumer finance companies has also cut into banks' business, forcing them to charge for services.

Banks impose fees galore
Checking accounts never used to be a profit center, but the banks have realized that all those account services cost money to maintain, says Chaney K. Campbell, a bank analyst with Sandler O'Neill & Partners in San Francisco. "Banks realized they could continue to up fees and make money off of those."

When you close an account Customers who want to close accounts should make sure that all checks have cleared. Also, if paychecks are directly deposited, customers should arrange to have that process stopped at least three weeks before closing the account.

"There are fees for opening an account, closing an account and moving cash from one account to another," says Ed Mierzwinski, consumer program director of the U.S. Public Interest Research Group, a consumer watchdog group based in Washington, D.C. "I have nothing against anyone earning a profit. But if banks want to make money, they should do it the old-fashioned way -- by making loans to consumers, not by picking their pockets."

Mierzwinski says that during the past few years, PIRG has tracked the newest bank fees, from inactive-account fees and missing-signature fees to balance inquiry fees. "Banks charge consumers for using (their automated teller machine) cards too much, and for using them too little ... they even charge a consumer who innocently deposits someone else's bad check."

A "processing fee"
The new NationsBank/Bank of America giant charges a $10 fee if a checking account is closed within 180 days of opening. That fee is in addition to any regular maintenance fee the account may carry.

"The idea is, we try to spend considerable time with the customer to identify the right kind of account for them, so this is a processing fee," said Jerri Franz, a NationsBank spokeswoman. "If you decide to switch to another bank product, there is not a fee."

Likewise, First Union charges a $10 fee if a checking account is closed within six months of opening. In response to customer outrage, the bank did away with the fee briefly in 1997, but it has recently revived the "administrative cost." As at NationsBank, the fee is used to process a closed account, says Tara Bullock, a First Union spokeswoman.

To dodge this latest fee, what can a consumer do?

• Ask for a fee schedule upfront when opening a checking account.
• Ask if there is a fee for closing a checking account. If so, ask if the fee will be charged if the account is closed within a certain time period -- for example, within six months or one year.
• Scan monthly statements for announcements of changing fees, especially if your bank has recently merged with another.
• Shop around for banks with better deals, especially on services that are frequently used.
• Consider going to a credit union or small community bank, which sometimes offer better deals than banks.

Bucking the trend
Still, some large banks, including Citibank and Chase Manhattan, do not charge a closing fee. Neither do small community banks and credit unions, according to the Bankrate.com survey.

Customers value convenience -- even when they're aware of fee increases. They are more likely to stay with their longtime bank than they are to shop around for an institution with lower charges.

The largest credit union in the nation, with 1.6 million members worldwide and $10 billion in assets, Navy Federal Credit Union in Vienna, Va., serves military personnel. Quick access to money and "minimal fee hassles" are important to its members -- and closing an account is free, says public relations specialist Loren Moeller.

Members of the State Employees' Credit Union in Raleigh, N.C., don't get charged, either.

"We would have to have a very strong justification for charging our members such a fee," says Robert S. Hall, vice president of the credit union. "And unlike banks, we are held accountable for any new fees by our members,"

-- Posted: June 29, 1999