Bankrate's fall '06 checking study: Fees rise
Interest-bearing accounts a poor choice
A sharp contrast between interest and noninterest checking accounts
will soon become apparent. But let's start with the most obvious
difference between the two -- interest earnings.
Here, there is good news and bad news. The good news
is that the average yield is the highest in more than three years.
The bad news is that, at 0.34 percent, the average yield is still
dreadfully low. In other words, despite the sharply higher interest
rates of the past two years, if you're holding money in an interest-bearing
checking account you're likely still waiting for the winds of interest
rate fortune to blow your way. See interest
Minimum balances up, too
While the minimum opening deposit for both interest and noninterest
accounts increased to new highs in this edition of the survey, the
fact is the requirement is a lot higher for interest-bearing accounts.
The threshold to get what passes for interest earnings shot higher
to $615.41, a 43 percent increase from the spring survey. While
the average minimum opening deposit for a noninterest account also
increased by a notable percentage, up 21 percent since the spring,
the average is still a very reasonable $87.67. See minimum
We're just getting started.
The balance requirement to avoid fees on interest bearing accounts
rose to a new high -- again. Account holders must now strand an
average of $2,660 in an interest account, at a pitifully low yield
of 0.34 percent, just to avoid fees. Noninterest accounts are a
different story, with the average just $209.72, the second lowest
level ever found in the survey.
Average service fees flat or lower
And about those fees you're trying to avoid? For interest accounts,
the average monthly service fee remains within a well-established
range at $10.74. But for noninterest accounts, the average monthly
service fee hit a new low of $2.52.
Let's recap. Interest accounts pay very little in
the way of interest but require an initial deposit that is 7 times
that of noninterest accounts just for the privilege of earning interest.
You'll also need to strand more than $2,600 in the account to avoid
fees, and if you don't, expect to be relieved of an average of $10.74
of your hard-earned money each month.
By now, you're probably asking yourself why in the
world you'd want to trouble with an interest checking account in
the first place. That's a fair question. After all, you'd be better-served
looking for a free checking account, one that has no fees or balance
requirements regardless of how many checks you write, and devoting
the balance that would otherwise be stranded at low returns toward
a high-yield money market or savings account. You'd still maintain
access to the money when needed, would earn yields exceeding 5 percent
on your savings, and not be faced with a flurry of fees and balance
requirements each month. To find the best-yielding savings and money
market accounts, use Bankrate's search