Lower fees, more free accounts in 2002See
the most recent version of the checking study.
news about checking accounts is a bit brighter this survey.
Some banks have lowered their fees and balance
requirements for maintaining an account. There are also more free
checking accounts than ever before -- although the overall number
is still very small.
Most banks still don't assess per-item fees
if, for instance, you write more than a certain number of checks.
And, the number of banks that let you access your account online
This doesn't necessarily mean banks have decided
to give customers a break.
"Keep these fees in perspective,"
says Bankrate financial analyst Greg McBride. "Even with the
moderation, many are still higher than they were a year or two ago.
Before we assign a kinder, gentler label, the consumer should see
a more prolonged trend."
McBride believes many banks may simply be juggling
their account offerings.
"On average, banks offer four accounts,
so they may jockey the fee and balance requirements among those
different accounts in a way that brings the average fee down. Profitability
and viability have become central issues over the past couple years,
and we're seeing that reflected in many of their fee structures."
Yields on interest-bearing accounts are lower
than ever and usually not worth the required minimum balance. And,
fees for bouncing checks have reached an all-time high -- a punitive
penalty that repeat offenders may deserve, but perhaps not customers
who inadvertently overdraw their accounts once a year.
As always, this edition of the Checking Account
Pricing Study gives you the lowdown on everything from fees and
monthly service charges to yields and minimums required to open
an account. In addition, there are sections covering ATM fees and
Bankrate.com researchers compile the data by
surveying 1,261 accounts. Forty-three percent (545) are interest
accounts and 57 percent (716) are non-interest. The report covers
350 institutions representing the largest banks and thrifts in each
of the 35 largest U.S. markets.
Clearly, checking accounts are not a one-size-fits-all
proposition. If you write a lot of checks and keep a high balance,
you'll want an account with features very different from the person
who writes a dozen checks a month and keeps a low balance.
This study has an interactive
section to make it easy for you to find the accounts in your
metropolitan area that suit your checking needs.
We've designed three scenarios and applied them
to all accounts in the study. Each scenario assumes a $1,500 balance
is maintained in the account:
- Typical: 12 transactions a month,
one bounced check a year
- Transactor: 25
transactions a month, one bounced check a year
- Saver: 12 transactions a month,
no bounced checks during the year
Here are some of the major findings of the Spring
2002 Checking Account Pricing Study:
Yields get slimmer
Yields on interest checking accounts have dropped to an average
of 0.61 percent.
That's down from 0.97 percent in the fall 2001
Banks have been stingy with yields for quite
some time, due partly to the fact that we're in the lowest interest
rate environment in 40 years.
More than 77 percent of the interest accounts
surveyed yield less than 1 percent.
Minimum balance to earn interest
The fact that banks are paying less interest doesn't stop them
from raising the minimum balance required to get that 0.61 percent.
The average minimum balance required to open an account and earn
interest rose 3 percent to $718.40. That's 5 percent higher than
a year ago and 8 percent more than what was required in October
If a non-interest account is fine with you,
you'll have to pony up an average of $74.98 to open a checking account.
That number has been pretty consistent for the past few years and
is actually down 1.7 percent from last fall.
Balance to avoid fees
Despite the increase in balance needed to earn interest, a
bright spot for folks who like interest-bearing accounts is that
the average minimum balance required to avoid fees dropped by 4
percent in the last sixmonths.
Nonetheless, it's still pretty steep, $2,330.60.
For non-interest accounts, the minimum balance
required to avoid fees is $352.65 -- a drop of 13 percent since
last October and another statistic highlighting the big difference
between interest and non-interest checking accounts.
Monthly service fee regardless of balance
Sometimes it doesn't matter how much money you have in an account
-- you'll still have to pay a monthly service fee. The number of
accounts fitting that scenario dropped from 402 to 396 since October.
Monthly service fee -- interest account
More good news. The average monthly service fee on interest
accounts declined by 1.6 percent to $10.67 from the peak of $10.85
last fall. More bad news. That's 11 percent higher than the average
just three years ago.
The average monthly service fee dropped a bit
for non-interest accounts, too. It now stands at $6.11, 1 percent
less than the $6.19 average last fall.
Most accounts still do not assess per-item fees. An example
of a per-item fee is when you're allowed to write a limited number
of checks per month, and the bank charges 25 cents for every check
over the limit.
Among interest accounts, 88.4 percent do not
assess per-item charges -- the highest percentage since spring 2000.
More than 70 percent of non-interest accounts don't have per-item
When it comes to the relatively few accounts that carry per-item
charges, the average number of free transactions is 17 for interest
accounts and 12 for non-interest accounts. Those numbers are the
same as in the last study.
The average per-item fee after exceeding the
allotted free transactions is 33 cents for interest accounts, down
from 34 cents in October. For non-interest accounts, the average
is 56 cents, up from 54 cents in October.
The reason interest accounts provide more transactions,
a lower average per-item fee, and have fewer accounts charging the
fee is because they have higher service fees and balance requirements
that usually buy the consumer an unlimited number of monthly transactions.
Free checking accounts
Big differences between interest and non-interest accounts
in terms of minimum balances required to open an account and the
minimum balance required to avoid fees make it clear that for most
people, non-interest accounts are the better deal.
Another decisive factor is that the majority
of free accounts are non-interest.
Free accounts have no monthly service charges
or per-item charges regardless of balance.
A total of 110 accounts are free as of this
survey, vs. 96 in October. Unfortunately, that's just 8.7 percent
of all accounts surveyed. Currently, 98 of the free accounts are
non-interest, while 12 pay interest.
However, sometimes it can be remarkably easy
to get a free account; you may just have to sign up for direct deposit
of a paycheck or a government benefits check. Other banks may have
other stipulations, such as bypassing the return of checks or image
statements, or refraining from visiting tellers -- in other words,
banking primarily by phone or ATM.
Non-sufficient funds fee
Bouncing a check keeps getting more expensive. The average
non-sufficient funds (NSF) fee reached a new high of $25.21, a 1.4
percent increase since October.
The highest NSF fee, $35, is the same since
October 2000. The lowest NSF fee, $14, is up from $12 in October.
If you're the type of person who has a hard
time balancing a checkbook, it's a good idea to get overdraft protection.
Overdraft protection is available on 96 percent of accounts.
Accounts offering online access
Online account access is becoming more prevalent. Ninety percent
of interest accounts offer it, up from 85 percent in October. That
compares with 94 percent of non-interest accounts -- the same as
Online bill pay availability also increased
from 83 percent to 85 percent on interest accounts, while holding
steady at 94 percent for non-interest accounts.
-- Posted: March 28, 2002