Yields down, free checking accounts up

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See the most recent version of the checking study.

The fall 2002 Checking Study isn’t as upbeat as our spring report six months ago when some banks had lowered their fees and balance requirements.

The punishing economic climate has no doubt taken a toll as deposit yields have dropped to levels that trail our low inflation rate.

Minimum balances to avoid fees have risen, ATM surcharges continue to surge and the fee gap between Internet banks and traditional banks is narrowing.

On the other hand, there are more free checking accounts, and the monthly service charge on interest accounts is down for the second survey in a row.

“The last time we saw a couple different fees and balance requirements take a dip. This time, with the exception of the monthly service fee, that streak has not been extended,” says Greg McBride, Bankrate.com financial analyst.

“We’ve seen a resumption in the escalation of punitive fees: bounced-check fees, ATM fees.”

When it comes to checking accounts, there’s no such thing as one size fits all. We’re here to help you find the account that gives you everything you need in a checking account, yet saves you money.

In keeping with the Bankrate.com Checking Study tradition, you’ll find a wide range of fee and balance data including; monthly service charges, minimum balances to open an account and minimum balances to avoid fees. There also are sections on ATM fees, Internet banks and the Best and Worst deals.

Bankrate.com researchers compiled the data by surveying 1,232 accounts. Forty-four percent (539) are interest-paying accounts, and 56 percent (693) are noninterest-paying accounts.

The report covers 350 institutions representing the largest banks and thrifts in each of the 35 largest U.S. metropolitan markets.

The study includes an interactive section to make it easier to find the account that fits your checking needs. Simply
click on your metropolitan area, click on the product you’re looking for and then select the transaction scenario that best describes you.

Three scenarios have been applied to all accounts in the study. Each scenario assumes a $1,500 balance is maintained in the account:

  • Typical: 12 transactions per month, one bounced check per year
  • Transactor: 25 transactions per month, one bounced check a year
  • Saver: 12 transactions per month, no bounced checks

You’ll then see a list of the best traditional banks, online banks and savings institutions that match your needs.

But first, these major findings of the Fall 2002 Checking Study can give you a panoramic view of the checking account landscape.

Sagging yields
There was a time when you could get 5 percent interest on your savings account. Now, you’re doing OK to get 1 percent with an account balance of less than $1,500.

The average yield on interest checking accounts has dropped from 0.61 percent to 0.57 percent since March.

This is lower than anything we’ve seen in prior studies.

Another discouraging fact is more accounts than ever, 81 percent, yield less than 1 percent. These yields trail inflation even though inflation is extremely low, under 2 percent.

Minimum to open account and earn interest
The price to earn that low yield has risen — again. Banks want you to keep an average minimum balance of $727.62 in your checking account. That’s 1 percent higher than the March study, and 10 percent higher than two years ago.

Minimum to open noninterest account
If you use a checking account simply to cover checks, and not as a savings vehicle, you can open a noninterest account for an average minimum of $74.28. That’s the lowest we’ve seen in any study, but only slightly. The minimum balance for these accounts has remained fairly consistent. Four years ago it was $75.92.

Average minimum balance to avoid fees
Avoiding fees in an interest account got a lot more expensive. The minimum balance required jumped 11 percent to $2593.14. That’s an increase of 25 percent in four years.

Noninterest accounts fare quite a bit better when it comes to minimums to avoid fees. The average minimum is $357.43, just 1 percent more than six months ago.

Accounts requiring $5000 to avoid fees
The number of checking accounts that require a minimum balance of $5000 to avoid getting socked with fees has increased. The number of interest accounts, 112 out of 539, is at a new high, up from 103 in the last survey.

For noninterest accounts, just 10 of 693 surveyed have this lofty balance requirement.

Accounts with monthly service fee regardless of balance
Sometimes it doesn’t matter how much money you keep in your checking account; you’ll still have to pay a monthly service fee. There are fewer of these accounts this time around. For both interest and noninterest accounts a total of 364 accounts charge a service fee regardless of balance, compared with 396 accounts in March.

Average monthly service fee
The average monthly service fee for interest accounts has dropped for the second survey in a row.

The current average of $10.59 is down from $10.65 in March, but still 1.5 percent higher than the $10.43 average two years ago, and 10 percent higher than the $9.59 average four years ago.

The average monthly service fee on noninterest accounts climbed 1 percent from $6.11 in March to $6.18 now. This figure has been quite consistent over the past four years.

Accounts not charging per-item fees
A per-item fee is assessed if, for example, you write 18 checks on an account that allows only 12 checks per month.

Most accounts, interest and noninterest, don’t impose per-item charges. In fact, since March, the percentage of banks that have opted to not assess these fees on interest accounts has grown from 88.4 percent to 89.1 percent. On noninterest accounts, the percentage rose from 70.1 percent to 71.1 percent.

Average number of free items
Among the accounts that do carry per-item charges, the average number of free transactions permitted is 16 for interest accounts and 12 for noninterest accounts.

For interest accounts, this is down from 17 in March and represents the low end of the range seen over the past four years. Among noninterest accounts, the average of 12 hasn’t changed at all in the past four years.

The average per-item fee that kicks in after using the allotted free transactions is 34 cents for interest accounts, up from 33 cents in March, and 57 cents for noninterest accounts, up from 56 cents in March.

Interest accounts generally allow more free transactions and have a lower per-item fee because they have a higher average monthly service fee and higher balance requirement than noninterest accounts. The higher fees and balance requirements usually buy the customer some leeway in monthly transactions.

Free checking accounts
Free accounts, those that have no monthly service charges or per-item charges regardless of balance or activity, are on the rise. The increase in free checking accounts has been in place for the last three studies. Of the 127 accounts that fit this description, 112 are noninterest. Those 127 accounts comprise 10.3 percent of the total accounts surveyed, up from 8.7 percent six months ago.

NSF fees
The average fee for bouncing a check, the non-sufficient funds (NSF) fee, continues to climb.

The average fee is $25.58, up 1.4 percent from $25.21 in March, and up nearly 18 percent in the last four years.

The range of NSF fees is the same as it was in March, $14 at the low end, $35 at the top.

Accounts offering overdraft protection
Short of making sure you don’t bounce checks, overdraft protection is the best way to avoid those hefty fees. Ninety-six percent of interest and noninterest accounts offer overdraft protection

Online access

If online banking is what you want, you’ll find it offered on 90 percent of interest-paying accounts and 94 percent of noninterest-paying accounts; the same as in the previous study.