| NEW YORK, March 4
NEW YORK, March 4 Interest rates at 8 times the
national average! Absolutely no overdraft fees! No minimums!
Free checks! Get your ATM fees reimbursed!
With nearly half of the $10 trillion in bank deposits in the
U.S. concentrated in the top five banks, it takes a lot of
exclamation points for the nation's 6,000-plus other banks to
grab any attention from consumers.
More than one in 10 big-bank customers are dissatisfied and
looking for change, according to a 2012 report from Javelin
Research & Strategy. Plus, there are also some 34 million
households that are unbanked or underbanked, according to the
Federal Deposit Insurance Corp. That creates a market for small
financial institutions which count their deposits in mere
millions instead of trillions.
Federal regulations in the Dodd-Frank financial reform bill
put limits on the 90 banks with $10 billion or more in deposits.
And banks have been operating in a very low interest-rate
environment for a couple of years, crimping profits.
To recoup money, megabanks are charging higher monthly fees
for checking accounts, raising deposit minimums, cracking down
on overdrafts, pumping up any fees they are still allowed to
charge and offering little return on interest-bearing accounts.
The three most important considerations before you switch to
an online bank service are monthly fees, interest rates and
overdraft charges, says Susan Weinstock, director of the Safe
Checking in the Electronic Age Project for The Pew Charitable
Trusts. Of course, it's important to pay attention to other
factors including availability of ATMs, customer service
reputation and investment options.
HOW TO EVALUATE THE OFFERS
In the mobile- and web-based banking market, consumers are
getting bombarded with pitches for new services that home in on
dissatisfaction with big banks.
Upstarts include GoBank, an offering from Green Dot Corp
, which has primarily offered prepaid debit cards but
now is breaking into banking after buying Provo, Utah-based
Bonneville Bank in 2011. Other companies work with established
banks, like Portland, Oregon-based Simple, a partnership with
Bancorp Inc, now in beta testing, and SmartyPig,
partnered with BBVA Compass Bancshares Inc, which offers a
goal-oriented savings tool.
Even non-bank offerings like PageOnce, an app for financial
organization, are getting into the game. PageOnce announced
recently that it would be offering a new service for
To figure out if an online financial institution is right
for you, you need to know what you'll be charged on a monthly
basis. In addition, you need to know what minimum balance is
required to get those charges waived. For example, for basic
checking at JPMorgan Chase & Co, you are charged a $12
monthly fee unless you have monthly direct deposits of $500, a
$1,500 daily balance or $5,000 or more in linked accounts. At
Aspire Federal Credit Union, basic checking is free with no
minimum balance. To join, you have be a U.S. citizen over the
age of 18.
If you see an offer like Aspire's for truly free checking,
it means that there are no charges, no matter what the balance.
These offers are diminishing, available at only 39 percent of
banks - down from 45 percent in 2011 and 79 percent in 2009,
according to Bankrate.com.
With guidance from Pew, many big banks, including Bank of
America (), have
voluntarily adopted simple disclosure for checking accounts.
(You can research more banking options here at)
Washington-based Pew initially recommended that banks put a
box on the scorecard listing rates on interest-bearing checking
accounts, but Weinstock says the rates change so often that the
banks can't keep them updated.
Consumers may need to search around to find out the latest
rate information. There are plenty of websites that track bank
offers, such as bankrate.com or findabetterbank.com.
Some online bank services offer interest rates as high as 3
or 4 percent. The national average for interest-bearing checking
accounts on Friday was 0.52 percent, according to bankrate.com.
Internet-based banks, community banks and credit unions,
which are 98 percent of the banks in the U.S., tend to offer the
Consumers should also do the math to figure out if a 1 to 2
percent rate differential will make a significant impact on the
bottom line. Kasasa, an umbrella group for 148 community banks
and credit unions in 39 states, touts its high rates on
interest-bearing checking accounts. It calculates the high rates
offered by 30 of its member banks would add about $100 in
interest in a year to an account of $2,000.
Before consumers hand over their deposits, they should find
out how much the bank charges for overdrafts, how they process
the deposits and how long it takes to make funds available. Bank
procedures can sometimes make one $35 overdraft fee turn into
several. This can happen if a person writes multiple checks and
the bank processes the largest one first - if it triggers an
overdraft, all the smaller checks will be overdrawn too.
Once you are armed with this information, it's important to
consider the value of overdraft protection to cover any
transactions that would be denied if you don't have funds to
cover it, Weinstock says.
Pew did a survey last year and found that 54 percent of
consumers had not opted for overdraft protection. "Obviously,
there's a lot of confusion," Weinstock said.