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The Rising Cost Of Doing Business With Banks

The Federal Reserve Bank annually collects fee data on banks and thrifts in the United States so that comparisons could be made. In November of every year, Fed collects data from 700 banks and from 350 thrifts and delivers the report to Congress.

Their latest report seems to indicate that the larger the bank, the larger the fees being charged.For instance, the larger, multistate banks charge 97 cents more a month for noninterest checking accounts, and 45 cents more a month for statement savings accounts, than the smaller, in-state institutions charge for the same accounts.

Other Charges
The average balance requirement at all financial institutions for noninterest-bearing checking accounts stayed at $480. However, interest-bearing checking accounts went up $38 over the previous year, bringing the average minimum balance required to avoid charges to $1,102.

Overdraft charges went up too. A bounced check at a bank now costs about $16.36 on the average.The headlines, of course, have been over the ATM charges. Banks now charge their customers (average) 59 cents for a withdrawal at their own machines, but $1.10 to withdraw from another institution's ATMs.

Free Checking Disappearing
Free checking? It is now offered at only 5.5% of banks. And the number of banks now charging a per-check charge went from less than 25% of institutions last year to 45% this year.

But More Free Services
Even though some banks may be charging more for services, and fewer are offering free checking, many are redesigning products in order to tighten relationships with existing customers.

In some of the new offerings, customers can get discounts on PC banking, they can apply for no-fee credit cards, get free travelers checks and notary services, get free investment planning and consultation, get discounted closing costs on mortgages, and they can "earn" free ATM transactions at other banks.

Industry experts say the ATM has not been promoted as a place where people can make deposits. In an attempt to reverse this trend, one bank (NationsBank) pays customers up to $2.50 a month to use the ATM for deposits.

Congress Getting Involved
Congress has been reviewing the report from the Federal Reserve for several months now. Part of the results of that study is legislation that has been introduced by Senator D'Amato (R-NY) and Rep. Sanders (Indep.-VT) in the Senate and the House that would prohibit banks from charging noncustomers who use their ATMs. Some are convinced that consumers must be "protected."

Others in the Senate and the House maintain that the market should be free, and if left alone, will find its own level.

We'll keep you posted.

Copyright © 1997 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 7, No. 8, 7/97

First published on 07/01/1997

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