The varieties of banking experience:
the 20 best and 20 worst checking accounts
By Michael D. Larson • Bankrate.com

Citibank uses some funny math with its checking accounts. You give them $10,000. They give you -- well, technically -- save you $25. First Citizens Bank of Atlanta isn't much better with a slide rule either. They want $25,000 in exchange for $30.

That's why, together, the two banks have six of the worst 20 (including the five worst) checking accounts in the nation, according to Bankrate.com's latest semiannual Checking Account Pricing Study.

The study analyzed fees, rates and policies on 1,210 checking accounts offered by the 10 largest institutions in each of the 35 largest U.S. markets. Based upon a typical account-holder profile, staff researchers figured out how much money somebody would make or lose over the course of a year with each of those accounts. They then compiled a list of the 20 best accounts and 20 worst accounts from the data.

The results should come as no surprise -- at least to account-holders used to getting nickel-and-dimed by the big boys of banking

The worst of times ...
"The Worst Buys list is once again populated with some of the nation's largest institutions," the study finds. "As with the past four editions, none of the 50 largest U.S. banks made the list of best deals."

In San Francisco, for instance, Citibank demands its "Regular Checking" customers keep $10,000 in their accounts in exchange for a waiver of the company's $25 monthly service fee. The account pays no interest, carries bounced-check fees of an above-average $30 and charges $5 to consumers who want their checks returned to them. The annual cost to the customer of the account is a mind-numbing $330.

That's nothing compared with lesser-known First Citizens, which has the dubious honor of offering the worst account in the country. Its "Elite Gold Checking" requires customers keep a $25,000 balance in their accounts earning a measly 2.15 percent yield to avoid a $30 monthly service fee. The annual cost to an average consumer would be $355.75.

A spokeswoman for BB&T Corp., which is in the process of acquiring First Citizens, said the lofty requirements allow the bank to offer more services to its customers -- including traveler's checks and money orders -- without worrying about collecting additional charges for them. A.-C. McGraw added that more than 95 percent of Elite Gold account holders keep enough money on balance to avoid paying any charges and that the company plans to keep offering the product after completing its merger with First Citizens in July.

"That is the top-tier account and the customers, the clients, are maintaining the status that allows them to avoid incurring fees," she says.

Industry officials say the First Citizens approach to pricing makes sense because high fees are needed to ensure checking accounts are profitable.

"They know what they have to charge in order to make those accounts swim," says Chuck Bruney, senior vice president at the bank consulting firm Speer & Associates Inc. of Atlanta. "They really understand where they have to set the fees and the balances to make those work."

As for rubber-check charges, Bruney says they help keep consumers in line.

"There is a segment of the banks' customers who write a tremendous amount of bounced checks. It's not really for the most part put in place to generate revenue although it does generate quite a bit of fee income," he says. "Mostly, I would say and I really do believe this is true, it's trying to discourage people from that type of behavior."

The best of times ...
But before you go stuffing your money under the mattress out of fear, there is some good news.

Consider two-time champion Telebank, which tops the 20 Best Buys list when pure-play Internet banks are excluded (Telebank has a physical presence in a couple of markets, even though it's considered a predominately online bank). Its Interest Checking account yields 3.15 percent and requires just $1,000 to avoid a maintenance fee, which is only $5 anyway. Original checks are returned for free and the customer pays just $15 per bounced check. With this account, the typical customer would earn about $32 a year.

Old-line local banks such as Flagstar Bank in Detroit and Arundel Fed in Baltimore also offer decent interest checking accounts that feature low fees and middle-of-the-road yields. That gives customers who are keen on traditional banking several respectable options.

'Net-only banks lead the pack
Still, Internet-only banks sweep the competition when they're included in the rankings. Some are owned by brick-and-mortar institutions but operated independently, while others are completely independent and exist only online. Yet both types gang up to take the top seven spots in the combined online/offline Best Buys list.

Leader Security First Network Bank, for instance, will leave a standard customer $65 richer at the end of one year. That's because the firm offers a 6 percent yield and charges no monthly fee on its Interest Checking account, but that's subject to change after April 15. USABancShares.com and WingspanBank.com have stellar offerings too, although Wingspan requires a significant balance to earn their top yield.

Remember: Good accounts are out there, it's just a matter of finding them. Don't settle for less.

-- Posted: March 28, 2000