| Checking study: Bank fees still
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Any interest in interest checking?
How much interest do you earn from your checking account? If you
have a typical interest checking account, not much. And how much
of a balance must you keep in the account to avoid fees? For the
typical interest-bearing account, a whole lot.
Rising interest rates over the past few years have done very little
for the interest earnings of checking customers. But hey, maybe
it isn't really that bad. After all, the average yield on an interest
checking account is now the highest in three years.
Of course, this three-year high
is just 0.32 percent, up from a trough of 0.26 percent two years
ago. Not much improvement considering the Federal Open Market Committee
has boosted short-term interest rates from 1 percent to 4.75 percent
since June 2004.
The incongruity of it all is that
the average
balance required to avoid fees on an interest checking account
has hit a new high of $2,465. In the past two years, the average
balance required to avoid fees has increased 18 percent. So you
deposit more, yet don't earn appreciably more.
And what happens if you don't maintain
that hefty balance? The monthly
service fee on an interest checking account currently averages
$10.85, up slightly from $10.81 in the fall.
To avoid the landscape littered
with onerous fees and insurmountable balance requirements, look
at noninterest accounts instead. Noninterest accounts require balances
that are a fraction of those required on interest checking accounts.
The average amount
required to open a noninterest checking account is just $72,
compared to nearly $430 needed to earn interest.
Avoiding fees requires little more
than one-tenth that of an interest account, with the average just
$266. And what if you slip below that balance and incur a monthly
service charge? It's not nearly as big a deal, with the average
fee of $2.80, roughly one-fourth the fee charged on interest accounts.
One of the routine findings of
Bankrate.com's checking study is that interest checking accounts
are, by and large, a lousy deal. So is it preaching to choir to
point out this fact once again?
Not according to Forrester Research.
The company recently found, in a survey of online households with
more than $10,000 in liquid assets, that 52 percent of households
hold half or more of those liquid assets in a checking account.
This is a horribly inefficient deployment
of cash in an environment when the highest
yielding money market and savings accounts carry returns exceeding
4.5 percent. The additional interest earnings attainable by switching
to a free noninterest account, then devoting that $5,000 balance
to a higher-yielding money market account, is $209 per year -- without
surrendering any access to cash!
ATM fees
ATM
surcharges have soared more than 20 percent in the past two
years, with the average surcharge rising from $1.32 in early 2004
to a record $1.60 now. Since the fall 2005 edition of the survey,
17 institutions raised surcharges, while just four reduced the fee.
There has also been a sharp increase from one
year ago in the prevalence of ATM surcharges, with Washington Mutual's
reinstatement of ATM surcharges in the fall study being the primary
catalyst. Among the institutions that own ATMs, 98
percent now charge nonaccount holders for access, up from 89
percent two years ago and 91 percent one year ago. The bottom line:
If you use another bank's ATM, expect to pay (and pay more) for
the privilege.
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