Express checking accounts let consumers escape bank fees, minimums

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New low-priced checking accounts designed for customers who prefer to bank by ATM, telephone and personal computer are gaining popularity with consumers and banks.

These “express” accounts, as many banks call, them are the latest additions to a growing list of checking account options. Express accounts often boast low or no monthly fees and minimum balances, and other perks such as unlimited check writing.

“There’s a definite price savings on these products for consumers. It’s usually a better deal for the customer,” said Mary Ellen Georgas, principal at Furash & Co., a consulting firm in New York. “A lot of banks are developing these types of programs because it’s cheaper for the bank to deliver. This express account product is the type of thing that’s good for the customer and good for the bank.”

A rational approach
James McCormick, president of First Manhattan Consulting Group, agreed.

“It’s a way of giving lower-priced service to people who will incur lower costs. It’s a very rational approach, and for households that don’t need a branch it gives them a better deal.”

Some people, however, seem to be avoiding fees as much as they are searching for convenience.

“Consumers are voting with their wallets. Maybe 30 percent of households are quite price sensitive and will either cherry pick banks — change their banking relationship to avoid fees– or if they remain with the bank they will opt for low cost options such as self service and express checking,” McCormick said.

The catch
The catch? Customers are often charged fees for teller visits and for receiving checks back with their account statements. Anne Morgan Moore, president of Atlanta-based Synergistics Research, said such accounts have high appeal among students and younger customers “who are time and place oriented, who use ATMs and have no interest in going into a branch.”

Indeed, First Union piloted its first express accounts to college students in Washington and seven southeast states in 1996. Account features include no minimum deposit, no per-check fees, no fees for using First Union ATMs and no monthly fee for using a First Union CheckCard, an offline debit card accepted at all Visa locations. In addition, there is no monthly service fee for customers with direct deposit. However, customers will be slapped with a flat $8-per-month fee if they choose to bank with a teller.

Custom-made for students
Donna Smart, a First Union spokeswoman, said the convenience of the account was “overwhelmingly popular” with college students.

“They’re on the fly. They don’t want to spend a lot of time on their banking transactions.”

Based on the success in the college market, First Union rolled out an identical product targeted toward general customers in April 1997.

Cleveland-based KeyCorp also is marketing its express accounts to college students as well as the general market. Rolled out in 1994, KeyMoney Access and Key Student checking accounts include unlimited check writing, no monthly maintenance fees. The most distinctive feature of the accounts are they pay customers $.25 each time they deposit a check into an ATM, up to $1 each month.

Accounts are a reward
“Key wants to reward customers that bank with us electronically,” said Eric Chester, vice president of product management.

Yet, the express accounts are not meant to woo longtime branch customers out of Key’s branches.

“The majority of customers who come into this product are somewhat younger, busy and don’t have the time or the inclination to go into a branch,” Chestor said. “I don’t think we’re taking customers who are heavy branch users and persuading them to use this product. It appeals to people who are banking electronically already.”

NationsBank rolled out its express banking account in 1995, then relaunched it in 1997. In 1995, customers could not receive canceled checks back and could not avoid monthly maintenance fees by keeping high balances. Now customers who want checks back pay a fee of $1 per month and those who maintain a balance of $500 or more have monthly maintenance fees waived. The express account also allows customers one free teller transaction per month. A $1 fee for counter items filled out in lobbies has also been scrapped.

Choices are important
Tom Grueling, senior vice president of consumer marketing, said express checking has been extremely popular for NationsBank and that in some states as many of 40 percent of new customers opt for the account. He emphasized the importance of giving consumers many different banking choices.

“I don’t think the intent is to take people out of banking centers,” Grueling said. “It’s to provide customers with a full range of options so they can choose how they want to do their banking.”

McCormick said NationsBank fine tuning its express checking account is not unusual, adding that until the mid-1990s teller, telephone banking and other such services were free.

“Because everything was free before,” he said, “banks don’t have an understanding what will be viewed as acceptable and what fees will be viewed as problematic.”