| Negative savings marked 2006 |
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"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."
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