Consumers have choices as bank surcharges surge

By Frank Cho
Advertiser Staff Writer

When Honolulu technology manager Danny Fulgencio was charged $1 for making an ATM withdrawal from his checking account, it irked him.

But when he had to pay an additional $1.50 because it was another bank's ATM he used, he was outraged.

"It's not fair," said Fulgencio, who estimated he pays $60 or more a month in ATM and checking account fees. "They are making a lot of money from these fees I'm sure."

Many of Hawai'i's banks are making record profits these days, and rising fee income is one of the reasons. In 1999, the latest year for which figures are available, local banks and thrifts collected nearly $86 million from customers in fees for checking accounts, trust and investment services and even insurance products — an average increase of 10.2 percent over the past five years, according to filings with the Federal Deposit Insurance Corp.

However, not all of Hawai'i's banks have increased or added fees — some have even eliminated a few fees. Experts also note that many local banks' average fees still are below the national average.

And industry officials say any increase in fees, or additional fees, are needed to pay for the cost of new technology that consumers are demanding, while keeping profits growing in the face of a slow economy.

Still, the nationwide issue of bank fees has been raising the ire of consumers in recent years, becoming a lightning rod for complaints by consumer groups.

The consumer outcry over ATM fees even prompted the nation's first local ATM fee bans, approved in 1999 by San Francisco voters and Santa Monica's City Council. Last year, however, a federal judge struck down the bans, saying that only the federal government could impose such restrictions.

'Very delicate balance'

Banks say the surcharges pay for processing charges and expanding their ATM networks.

"We obviously are trying to increase income while at the same time keep fees at a reasonable level," said Wayne Miyao, senior vice president at City Bank. "We have to find a balance between increasing fees as well as maintaining customers, and that is a very delicate balance."

Because of the wide variety of banking options and services consumers can choose from at each financial institution, it's difficult to directly compare fee schedules. Ultimately, the services consumers choose, and how often they use them, affects how many fees and expenses they are subject to.

In general, in the past 14 months, American Savings Bank said it raised fees on six services, added one new fee, but waived a few fees on certain services for a period of time. First Hawaiian Bank said it has raised a number of fees over the past year, but could not say exactly how many. Bank of Hawaii, the state's biggest bank, said it raised one fee in the past 12 months.

Despite the increases, banking officials cite a nationwide survey released last summer by the American Bankers Association that found that the majority of customers pay less than $3 a month for banking services. Of the 1,000 people surveyed, nearly half reported paying no fees at all.

"The hype suggesting that most consumers overspend on banking services is way off base," Donald Ogilvie, the association's executive vice president, said in a statement.

Consumer groups cite their own surveys.

"Specifically in the area of checking accounts we are seeing greater fees, and minimum balances are going up," said Mike Moebs, chairman and chief executive officer of Lake Bluff, Ill.-based Moebs Services Inc., a firm that tracks fees in the banking industry for Congress.

Moebs said relatively new bank fees include ATM surcharges, cancelled-check fees and fees for closing an account. Meanwhile, some long-existing fees also are rising, he said.

Better off in Hawai'i

The nationwide average fee on a returned check rose to $20 last year, up nearly 18 percent from $16.96 in 1999, Moebs said. And since 1996, the cost to use another bank's ATM has nearly tripled, according to a report by U.S. Public Interest Research Group. On average, customers nationwide pay $2.86 on top of what their bank charges each time they use another bank's ATM, according to the report.

A recent survey of 350 banks nationwide by Bankrate.com, a Web site that tracks industry fees and rates, showed the average monthly maintenance fee on interest-bearing checking accounts rose by 9 percent to $10.43 in 2000. To avoid fees, the average account holder would have had to maintain an account balance of more than $2,000, up slightly from the previous year.

Hawai'i consumers typically are faring better, however. To avoid fees on an interest-bearing account, the average account holder would have to maintain a minimum balance of $500 at City Bank or American Savings Bank. Central Pacific Bank has a $750 minimum, but can waive it with a Social Security direct deposit.

At First Hawaiian Bank the minimum is $1,000, or an average daily balance of $3,000, to avoid fees on an interest-bearing checking account.

Bank of Hawaii has the highest minimum balance requirement for an interest-bearing checking account, at $1,500. For account holders who cannot maintain a minimum balance, Hawai'i banks charge anywhere from $6 to $11 a month.

All the banks also offer accounts with no minimum balance requirements, but those also can carry monthly service fees for everything from account maintenance to teller visits.

"I think in certain areas, bank fees have been rising. Particularly in those areas that are very labor intensive," said David Chang, senior vice president and retail banking group manager at Central Pacific Bank.

But Chang said the introduction of new fees, not large increases, is what has consumers riled up.

"I think in the past you saw much fewer fees, but now consumers see all these fee schedules that are much much longer and people are thinking we are charging them more for a lot of the same services," Chang said.

Branch fees

Among some new developments that Moebs said he is seeing is banks' charging different fees at different branches for the same services.

"I would say that this is something that probably didn't exist 20 years ago. Now it is getting to be more prevalent especially among bigger banks," Moebs said.

For example, at Bank of Hawaii a safe-deposit box 5-by-22 inches could run $50 a year at a branch in downtown Honolulu. That same box could cost $65 in Hawai'i Kai or Mililani, according to an Advertiser survey of fees.

"Customers need to shop around, not only among banks but within the bank they choose," Moebs said. "The first thing to ask if the service seems expensive is can you get it cheaper at another branch that is convenient for you."

Moebs said he has seen fees range 200 to 300 percent higher between branches of the same bank on the Mainland.

Bank of Hawai'i said fees are adjusted based on demand, availability and the cost of providing service in various areas.

"For some people, time is money. Today people have more choices and better value," said Lori McCarney, an executive vice president with Bank of Hawai'i. For example, McCarney points to the value of the bank's free online service, 24-hour telephone account access, 75 branches and free use of its 450 ATMs.

Not all bank fees vary by location. First Hawaiian Bank, the next biggest bank in the state, said its fees are standard across the state.

But bigger is not always necessarily better when it comes to banking costs. National surveys show that the biggest banks tend to charge some of the highest fees.

The Federal Reserve's annual report on bank fees, released in January, showed that stop-payment orders cost about $13.92 at small banks compared to $21.50 at their larger counterparts. And ATM surcharges — the amount charged to non-customers — averaged $1.22 at small banks, compared with $1.42 at large banks.

Multistate banks also charge higher fees, on average, than single-state banks for almost all items, the Fed study found.

But Chang said that by packaging banking services that fit needs better, consumers can minimize any fees they pay.

"We like to think we are giving the consumers more choice," Chang said. "It's a very sensitive market here. The first guy to go out and raise fees unnecessarily is going to catch a lot of flak."

Frank Cho can be reached at 525-8088, or by e-mail at fcho@honoluluadvertiser.com