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2006: A look back - A look ahead  
  The landscape was schizophrenic in 2006 but a slow economy could fuel a rates war in 2007.
 Checking & savings
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Negative savings marked 2006

"Assets are growing, loans are growing pretty well, but the core deposits backing these up are weak," says Fritz Elmendorf, vice president of communications for the Consumer Bankers Association. "So banks continue to be concerned about that and are looking for ways to attract more checking and savings."

One answer: free checking accounts. With no minimum balances and no monthly service charges, these no-frills accounts were going "the way of the dinosaur," but have made a resurgence as banks try to win new customers, says Linda Sherry, spokeswoman for Consumer Action.

Banks are also trying to encourage you to let them address a wide variety of financial needs. Look for deals that offer free services if you maintain a certain balance, says Leggett. The objective is to get you to move checking, savings or investments to that institution.

What about fees?
Consumer advocates say the penalty fee situation worsened this year for two reasons. First, during the past few years, the financial industry has sped up the amount of time it takes for checks to be processed (and for the funds to leave a customer's account), but it hasn't decreased check hold time on the other end for money going into consumer accounts. In addition, some institutions are adopting programs that allow approval of debit card transactions whether there is money in the account or not. As a result, consumers who may have deposited money are getting hit with overdraft and NSF fees.

"There are long festering problems that consumers have with routine banking practices that have not been addressed by Congress and the banking regulatory agencies," says Jean Ann Fox, director of consumer protection for the Consumer Federation of America.

Banks aren't alone. Courtesy-pay programs for credit unions "really started to take off in 2006," says Rick.

Financial institutions collect an average of $10.3 billion annually from overdraft fees, says Eric Halperin, director of the Washington office of the Center for Responsible Lending. And this year, debit cards were the No. 1 instrument of overdrafts, he says. "People aren't over drafting through checks anymore," Halperin says. "They are overdrafting through debit cards."

Consumer advocates have a number of concerns about courtesy overdraft programs. "We're getting more complaints, and we don't see an end to the trend," says Ed Mierzwinski, consumer program director for the U.S. Public Interest Research Group.

But, bankers say customers like the programs. "Consumers actually say, 'This is a great deal,'" says Leggett. "It saves them the embarrassment" of bouncing a check, he says. Banks "are doing this for good customers -- people who don't chronically abuse their checking accounts. Really what you want to look at is how the products have been marketed. You don't want to get rid of a very good innovation because there are a few bad apples."

-- Posted: Nov. 1, 2006
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