Bankrate survey: Checking account fees head higher
By Michael D. Larson • Bankrate.com

$360 a year just to maintain a checking account? $65 to have an overdraft protection line? $32 for each bounced check?

Welcome to banking in the 21st century.

From ridiculously high fees to onerous minimum balance requirements and double-dipping automated teller machine surcharges, banks are really sticking it to consumers, according to the latest Bankrate.com Checking Account Pricing Study.

The comprehensive, semiannual report contains rate, fee and policy information for 1,210 accounts from across the country.

Deep within its pages are some "worst of the worst" practices that will make you want to check your banker for a pulse and carry a few extra stakes (just in case) during the next branch visit.

Consider that Citibank in Miami expects customers to keep $10,000 in a checking account earning a yield of 0.5 percent in order to avoid a $25 monthly service fee. That means somebody with a $9,999 balance would pay $300 in fees to earn $50 in interest. Hmmm ...

(In fairness, Citibank spokesman Mark Rodgers says customers who don't have $10,000 floating around are steered toward cheaper accounts, such as the company's EZ Checking product. It has a more reasonable $1,500 minimum balance requirement and costs just $7.50 a month if you can't cough up the dough. Customers can count savings, money market and certificate of deposit balances, in addition to checking balances, toward that $1,500 requirement, too.)

Down and lousy
Speaking of interest checking, the yields banks pay on balances today are downright lousy. In this spring's study, they averaged just 1.05 percent. That's down from 1.33 percent in October 1998 even though interest rates such as the federal funds rate have soared by a full percentage point since then.

If banks aren't paying the money out one way, though, they're certainly taking it in the other. In Seattle, for instance, Bank of America charges an amazing $65 a year for credit line overdraft protection. Must be that all those Microsoft employees don't notice a few dollars missing when they're out water-skiing behind their yachts.

For all that's been said about online banking, companies are whacking consumers there too. Only 1 in 10 accounts surveyed give people free bill paying. Most charge between $4 a month and $6 a month, enough to pay for as many as 18 stamps that consumers can use to mail the darn bills themselves.

You have to give banks some credit, though, if only for the valiant efforts of their marketing departments. They've managed to come up with names like "Elite Gold Checking" and "Liquid Reserve Checking Plus" for what Bankrate.com identified as the worst and 10th-worst accounts in the nation, respectively.

You CAN do better
What's our point in all this griping? Don't sit on a bad deal, because there are plenty of better ones out there.

The average balance required to avoid fees on an interest-bearing account is $2,394 and the average fee is $10.23; if your bank is charging more, think change.

For credit line overdraft protection, a full 61 percent of banks surveyed charge no annual fee -- although you still pay the APR on lines-of-credit and/or a one-time fee -- while those that do charge typically want only $15 a year. Next time you overdraft your account at a Bank of America ATM by the Space Needle, you might want to give switching banks some thought.

As for those yields, there are plenty of ways to do better. A quick Bankrate.com search of high-yielding money market accounts, which like checking accounts are highly liquid, turns up an average yield of 5.84 percent. At least two were yielding more than 6 percent.

And last time I checked, the U.S. Postal Service still promises "Neither snow nor rain nor heat nor gloom of night stays these couriers from the swift completion of their appointed rounds."

Or delivery of your utility bill.

-- Posted: March 28, 2000