And the survey says: Small banks offer big checking bargains

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See the most recent version of the checking study.

Looking for a low-priced bank checking account? Think small.

Community banks and smaller regional banks have far better checking account deals than their much larger competitors, according to Bank Rate Monitor’s Checking Account Pricing Study.

In fact, not one of the Top 50 largest U.S. banks made it into Bank Rate Monitor’s ranking of the 10 least expensive bank checking accounts in the country. Instead, big banks like Citibank and NationsBank dominate the bottom of the survey where the most costly checking accounts are found.

Small banks a good value
“Small banks are known for good value in terms of price and service. That’s what they’ve been noted for for years,” said Gerard Hergenroeder, vice president of Speer & Associates in Atlanta. “It’s their bread and butter and it will continue to be their bread and butter.”

The reason: Small banks simply cannot compete with big banks when it comes to branches, number of ATMs, and other services. But small banks can compete on price, and they undercut the prices of their big bank competitors whenever they can.

Kansas City banks offer four of the five least expensive accounts in the country, with Bay Financial Bank in Tampa, Fla. rounding out the top five. Kansas City is one of several markets where smaller banks have chosen to use low prices as a means of competing against big, national banks moving into their territory.

Hergenroeder said such scenerios are becoming more common as the big banks get bigger and small banks look for a way to compete and to attract the 5 percent of retail customers who typically leave after a merger.

Stunning differences
The price difference for comparable checking accounts at small banks and big banks can be startling. Taking applicable account fees and interest rates into account, the 10 cheapest accounts — all from smaller banks — would earn the typical customer at least $21.45 a year. The 10 costliest accounts would sock the same customer for $229, or more.

Choosing the wrong bank checking account is especially costly in Tampa, Fla., where some of the best and worst offers are found. With a NOW Checking account from Bay Financial Bank, the typical customer would earn $26.70 over the course a year. With a NOW Advantage from NationsBank a customer would lose $245.75.

The worst deal belongs to Citibank of San Francisco’s regular, non-interest checking account, which would cost customers $315 in a year. The reason for such a whopping price is Citibank’s hefty $25 monthly account service charge, which is only waived with a balance of $10,000 or more in any combination of Citibank accounts, including investments, loans and mortgages.

And here’s the best
Mutual Savings Association in Kansas City, Mo. boasts the cheapest checking account in the country. Its prime checking account, which was yielding 3.05 percent as of the survey date in March, would earn account holders $30.75 over 12 months.

The rest of the top 10 best accounts can be found at North Side Bank & Trust in Cincinnati; Newton Federal Savings in Atlanta; United Savings & Loan in Seattle; Washington Federal Bank in Portland, Ore., and Washington Federal Bank in Seattle.

These low-priced accounts have several things in common: Low minimum balance requirements to open the accounts and to avoid fees, high yields, and low overall fees. survey results

  • Four of the 10 best accounts required a minimum balance of just $500 to avoid fees. The rest required a $1,000 balance.
  • Eight of the 10 accounts can be opened with $100 or less.
  • All of the best are interest-bearing checking accounts with yields raning from 2.63 percent to 3.05 percent.
  • Monthly service fees range from $5 to $10. No fees are reduced if the customer has direct deposit.
  • Eight of the 10 accounts have bounced check fees under $20.

About the survey

  • Each ranking assumes a $1,500 balance held in a checking account for a year with average account activity. For example, the analysis assumes that, over the course of a year, at least one check would be bounced and 12 transactions would be made against the account each month.
  • Bank Rate Monitor’s Checking Account Pricing Study encompasses more than 1,000 checking accounts at 350 institutions nationwide. The 350 are the 10 largest banks and thrifts, measured by assets, in the country’s 35 largest metropolitan areas.