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Bankrate Releases Fall 2007 Checking Study
Bankrate, Inc. (NASDAQ:RATE) announced that banking fees have hit all-time highs in several areas, including ATM surcharges ($1.78 up from $1.64), bounced check fees ($28.32 up from $27.40) and monthly service fees on interest checking accounts ($11.72 up from $10.74). The research is compiled in Bankrate's fall 2007 Checking Study, which surveys recent trends in banking fees, including interest and non-interest bearing checking accounts, ATM fees and bounced check charges. To view the complete study, go to www.bankrate.com/checkingstudy.
How much can additional fees cost you? Greg McBride, CFA, senior financial analyst at Bankrate.com offers the following examples:
-- Make one ATM withdrawal per week from another bank's ATM -- paying a $2
surcharge and $1.25 fee to your own bank -- costs a total of $169 over
the course of one year.
-- Overdrawing your checking account or bouncing a check just 4 times per
year is throwing away more than $100 annually -- not including any
additional fees charged by the merchant.
-- Interest checking accounts can cost you dearly. Fail to maintain the
required balance and you'll be docked an average of $11.72 each month.
This adds up to $140 per year, and is completely avoidable by getting a
free checking account.
Key Findings of the Study are:
-- The average bounced check fee hits a record high of $28.23.
-- The average ATM surcharge hits a new high of $1.78
-- The most prevalent ATM surcharge is now $2.00, up from $1.50 in
previous surveys
-- The ATM surcharge is assessed by 99 percent of the banks in the survey
-- It takes an average of nearly $1,000 to open a checking account and
earn interest
-- The average balance required to avoid fees on an interest checking
account is now more than $3,300
-- 68 percent on non-interest checking accounts have no monthly service
fee or balance requirement
-- Online banks are offering free checking accounts with yields as high as
5 percent
-- The fee charged by banks when their customers go to another bank's ATM
remains the lowest since 2002 at $1.25
Checking Accounts
Average Yield
The average yield on interest checking accounts ticked lower since last year, from 0.34 percent to 0.32 percent. Yields for interest checking accounts have been perpetually relegated to the cellar, a fact evidenced by the dreadfully low interest payouts in recent years regardless of whether interest rates were rising or falling. The ultra-low yield is not justification for letting a large balance pile up.
Minimum to Open and Earn Interest -- record high!
The average minimum deposit to open an account and earn interest jumped a staggering 60 percent, from $615.41 one year ago to $986.19 in the current survey. Furthermore, the average minimum to open the account and earn interest has more than doubled from $429.76 just 18 months ago. After remaining steady for a number of years, the opening balance has kicked into overdrive since the Spring 2006 survey. Why? While you may be able to open the account for a more modest sum, banks are raising the threshold it takes to earn the stated rate of interest. Although the number of banks increasing the minimum outnumbered those decreasing it by a count of 17-12, those that increased did so in an exponential fashion. What results is a much higher initial deposit to earn interest.
Minimum to Open a Non-Interest Account
The average minimum deposit required to open a non-interest account slid from $87.67 to $83.02 since last year. Although this is still the second highest ever found in the survey, the amount has always been a comparatively modest sum relative to interest-bearing accounts. There weren't many movers in this survey, with just 10 institutions changing their requirement since the last survey.
Minimum Balance Required to Avoid Fees -- Interest Account -- record high!
The balance that accountholders must keep to avoid fees on interest accounts continues to increase to stratospheric levels. Since last year's survey, the average balance requirement to avoid fees on an interest account jumped almost 25 percent, from $2,660.49 to $3,316.60. Imagine keeping more than $3,300 in a low yielding account just to avoid fees! There were 31 banks increasing the balance requirement and just 9 decreasing it since the last survey.
Minimum Balance Required to Avoid Fees -- Non-Interest Account -- record low!
The average balance requirement to avoid fees in a non-interest account fell for the fourth consecutive survey, dropping to a record low of $155.49. This is in stark contrast to interest-bearing checking accounts. Of the 226 non-interest accounts surveyed, 154 accounts (68 percent) have no balance requirement at all -- a hallmark of free checking accounts.
Average Monthly Service Fee -- Interest Account -- record high!
The average monthly service fee jumped nearly $1.00 per month, from $10.74 to a new high of $11.72 since the last survey. Of the 247 interest accounts in the survey, 235 (95 percent) charge a monthly service fee. And the list of banks increasing versus decreasing the fee since the last survey is as lopsided as a bad college football game -- 47 to 5!
Average Monthly Service Fee -- Non-Interest Account -- record low!
For non-interest accounts, the average monthly service fee fell for the fifteenth time in the 17 editions of the survey. The average monthly service fee is now $2.26, down from $2.52 one year ago. Just 71 of the 226 non- interest account surveyed charge a monthly fee.
Average Bounced Check Fee -- record high!
The average cost of a bounced check, referred to as a non-sufficient funds fee or NSF fee, climbed 3 percent to a new record high of $28.23. This is the second survey in a row where the average has hit new heights. The move higher was lopsided, with 88 banks increasing the fee against just 19 that reduced the fee in the past year. One final point, the survey gathers the cost of the first bounced check and with the use of tiered structures by some banks, the cost of overdrawing an account can quickly escalate.
Online Access Availability
The percentage of accounts offering online access has plateaued at the 98 percent mark, where it has resided for the past two years. While there hasn't been much change in recent years, the availability of online access is up from 89 percent in 2001.
ATM Fees
ATM Surcharge -- record high!
The average surcharge, the fee ATM owners charge non-accountholders to use the ATM, established a new high for the fourth consecutive survey, jumping from $1.64 to $1.78 in the past year. The trend toward higher fees is unmistakable, with 43 institutions raising their surcharge in the past year versus just three that reduced the fee. The $2 fee is now the most common, but the fee stretches higher, with 22 banks charging more than that. This is up from four banks one year ago, and includes Bank of America moving to the $3 threshold. The survey was conducted as of July 31, and at the time Bank of America had only instituted the higher surcharge in some of their markets. The remainder went into effect at the end of August.
Percentage of Bank-Owned ATMs with Surcharges -- record high!
Not only has the average surcharge grown, but so too has the prevalence with which the fee is assessed. As of the current survey, 99 percent of banks with ATMs -- yes, 99 percent -- charge non-customers for using the bank's ATMs. The bottom line is that if you plan to use another bank's ATM, expect to pay and pay handsomely for the privilege.
Fee to Use Non-Bank ATM
It isn't all doom and gloom on the ATM front. The average fee charged by banks when their own customers use another bank's ATM held steady at $1.25. This remains the lowest since 2002. The trend of the past couple years has been to enhance customer satisfaction by providing free or lower-cost access to non-bank ATMs. However, the fee-friendly policies often debut as a feature of certain accounts, rather than a bank-wide policy, though more banks are now instituting it across both interest and non-interest accounts. This doesn't erase the customer's exposure to the ATM surcharge, so it still isn't the equivalent of a free ATM withdrawal unless the bank has a reimbursement policy in place for ATM surcharges.
Annualized Cost of ATM Transaction Fees -- record high!
Due to the surging surcharge and the near-universal application of the fee to non-accountholders, Bankrate.com estimates -- using GAO data on the number of ATMs and non-accountholder transaction volume -- that consumers will pay nearly $4.4 billion in ATM fees in 2007. Actual fees incurred by consumers could vary considerably from this estimate if actual behavior differs from the previous GAO findings on non-accountholder ATM usage.
Internet Banks
For comparison, Bankrate.com looks at a selection of checking accounts offered by internet banks. In this edition, 16 internet institutions were surveyed, with 16 interest accounts and 6 non-interest accounts being included. Because interest checking accounts are offered by each of the internet banks surveyed, and because of the limited number of non-interest accounts they offer, the focus of comparison will be on interest accounts. Here is a look at how the interest checking accounts at internet banks stack up against what is available at traditional brick-and-mortar banks.
Minimum to Open
The stark contrast in minimum opening balances required for interest- bearing accounts compared to non-interest accounts holds true at both traditional and internet banks. In both cases, non-interest accounts can be opened for a fraction of what it takes to open an interest-bearing account and earn the stated return. However, the minimum to open and earn interest at an internet bank, $572.13 on average, is considerably lower than the average of $986.19 at brick-and-mortar banks.
Average Yield
The average yield at internet banks continues to dwarf that of traditional banks, 2.7 percent versus a paltry 0.32 percent. Since bottoming at 0.84 percent in the Spring 2004 version of the survey, the average yield at internet banks has increased for six consecutive surveys, rising from 2.25 percent to 2.7 percent since the previous survey last year.
Minimum to Avoid Fees
Another big difference between internet banks and traditional banks is the balance required to avoid fees on interest-bearing accounts. At traditional banks, the average is a nearly-insurmountable $3,316.60 while internet banks require a more reasonable $562.50. While the average balance requirement at traditional banks soared in the time since the last survey, the average balance requirement for interest checking accounts at internet banks dipped from $571.43 last year and has fallen mightily from the high of $2,454.55 two years ago.
Monthly Service Fee
The average monthly service fee on interest checking accounts at internet banks has fallen notably from $6.05 two years ago and $4.31 last year to a record low of $2.91 this year. Contrast that with the average at traditional banks that has ballooned to a new high of $11.72 in the most recent survey.
Bounced Check Fee
Bouncing checks is costly, regardless of where you bank. Although the average bounced check fee at internet banks is lower, $25.23 compared to $28.23 at traditional banks, consumers using bounced check fees as a basis for comparison shopping have bigger issues. It is best to avoid bounced checks by keeping accurate tabs on your available balance before initiating any payments.
Bankrate.com surveyed one interest and one non-interest checking account at the largest banks and thrifts in each of 25 large markets to find the latest trends on checking account and ATM fees. The offerings of 249 institutions were surveyed, with 247 interest accounts and 226 non-interest accounts in the survey. Bankrate.com also looked at the checking accounts of 16 internet banks to see how those offerings stack up against their brick-and- mortar counterparts.
Bankrate, Inc. (NASDAQ:RATE)
For more information: http://www.bankrate.com/