Dig deeper into your wallet to open an account
By Laura Bruce • Bankrate.com

Like the sun rising every 24 hours, you can count on checking account costs getting more expensive.

Among other things, Bankrate.com's Spring 2003 Checking Study found that it costs 14 percent more to earn interest in a checking account than it did in our previous study, just six months ago.

In many cases, banks are dropping cheaper accounts and replacing them with more expensive ones, and some banks are simply increasing the amount required to earn interest.

The increase isn't to offset the rising interest rate you'll get on that account. On the contrary, the average yield on interest checking dropped, again. It now stands at 0.47 percent.

Suppose you have no inclination to shell out an additional 14 percent to get a return of less than a half-percent interest. Perhaps you'd prefer the plain, noninterest checking account that, according to the survey, costs an average 19 percent more to open than it did last fall.

It's a difficult environment for consumers looking for a checking account that meets their needs and doesn't cost two arms and a leg. Institutions are raising minimums, and customers who want interest on their money are finding rates that aren't worth the hefty minimum balance.

Our semiannual checking account survey can help you navigate through the maze of checking account fees on interest and noninterest accounts and ATM fees and even help you find free checking accounts in your area.

Bankrate.com surveyed 1,235 accounts at 350 brick-and-mortar banks and thrifts representing the 35 largest markets in the United States. In this study, 571 (46 percent) of the accounts were interest bearing, 664 (54 percent) were not. We also surveyed 54 online checking accounts at 28 Internet banks.

Let's begin with the brick and mortar results.

Yield
I wish I could lose 10 pounds as fast as checking account yields lose basis points.

The average yield on interest checking accounts dropped from 0.57 percent to 0.47 percent since last fall's study.

More interest accounts than ever, 84 percent, have an annual percentage yield of less than 1 percent.

These statistics certainly back up the Bankrate mantra about not using a checking account as a savings vehicle.

Minimum balance to open
While the rest of the world has been in an economic slump, banks have been squeezing more money out of people who want to open checking accounts.

The average minimum balance required to open an account and earn interest is $832.09. That's a 25 percent jump since October 2000 and 14 percent higher than the $727.62 minimum just six months ago.

Noninterest accounts are certainly cheaper to open, but the average minimum balance has risen considerably since October.

The current average of $88.42 is 19 percent higher than last fall's minimum of $74.28.

Minimum balance to avoid fees
Opening an account is one thing, keeping enough cash in it to avoid fees is another hurdle.

On average, it requires a minimum balance of $2,964.10 to avoid fees in an interest-bearing checking account and $409.79 in a noninterest account. That's a 14 percent increase in both account types since last fall.

Got $5,000?
Some accounts set the bar at $5,000 if you want to avoid fees; not surprisingly most are interest bearing. A solid 25 percent of the interest accounts have the $5,000 minimum. That's a 21 percent increase since the last survey; 145 accounts vs. 112. Only 12 of the 664 noninterest accounts have this hefty minimum to avoid fees.

Money can't help you
Some accounts charge a monthly service fee no matter how much cash you keep in it. Perhaps fewer people are tolerating that dictate because the total number of these accounts has declined for the third consecutive study. Since October, the number of such accounts has dropped to 305 from 322 for noninterest accounts, but the number of interest accounts increased to 47 from 42.

Monthly service fees
The average monthly service fee for interest accounts increased a bit to $10.73 from $10.59. On noninterest accounts it remained unchanged at $6.18.

Per-item fees
Most accounts don't charge per-item fees, and the number of institutions deciding to join the crowd is growing. Currently, 90 percent of interest accounts don't charge a per-item fee, up from 89.1 percent in October. Among noninterest accounts, 73.5 percent have opted not to charge per-item fees, up from 71.1 percent.

Most accounts that charge per-item fees allow a certain number of free transactions before the fee kicks in. The average number of free transactions allowed is 18 for interest accounts and 12 for noninterest. These numbers have remained fairly constant for the last few years.

Interest accounts traditionally allow more free transactions because they typically have a much higher monthly service fee and minimum balance requirement.

The average per-item fee is 33 cents for interest accounts, quite consistent with previous studies. But the average 53 cents per-item fee for noninterest accounts is down from 57 cents in October.

Free checking
The number of free checking accounts continues to grow but remains very low. Just 11 percent of all checking accounts fit the Bankrate.com definition of free: no monthly service charge or per-item charges regardless of balance or activity, and includes the option of canceled check or image statement return if available. A total of 133 accounts fit the bill, up from 127 in the fall.

The majority of free accounts, 111, are noninterest. What's interesting is the number of free interest-bearing accounts has increased to 22 from 15.

NSF fee
The cost of bouncing a check keeps creeping upward. The average non-sufficient funds fee (NSF) is $25.82, up 1 percent from $25.58 in October. This fee has increased in every study dating back to October 1998, and is up 19 percent since that time.

The lowest NSF fee in our survey is $10, the highest $35; the same range we saw in October. The $35 high has held for six consecutive surveys.

Overdraft protection
If your checkbook-balancing habits put you in danger of bouncing checks, consider signing up for overdraft protection. It's available on 97 percent of interest accounts and 96 percent of noninterest accounts. That's consistent with previous surveys.

Online access
If online access to your account is what you're looking for, most institutions offer it. Ninety-four percent of interest accounts offer online access, up from 90 percent just six months ago. Online access is offered on 96 percent of noninterest accounts, up from 94 percent.

Online bill pay is available on 88 percent of interest accounts and on 95 percent of noninterest accounts.

-- Posted: March 27, 2003