Posted on: Sunday, May 16, 2004

Shop around for best checking accounts

By Russ Wiles
Arizona Republic

It might be time to check up on your checking account.

Banks continue to come out with new bells and whistles for these once-simple financial products, tying them into debit cards, automated teller machines, online banking and other services in an effort to cement customer loyalty.

It's not hard for vigilant consumers to obtain attractive checking services. Roughly 11 percent of accounts now are free, meaning no monthly service fees or per-item charges, says a new report from Bankrate.com. That's up from 6.5 percent of checking services that were free in 2000.

But that means 89 percent of checking accounts do carry monthly fees, and almost all accounts have a variety of other charges that have been rising in recent years. These include higher costs to cover bounced checks and to use nonbank ATMs.

"Bounced-check and other punitive fees aim to discourage certain behavior (by bank customers) and exact a price for that behavior," said Greg McBride, a senior financial analyst for Bankrate.com in West Palm Beach, Fla. "It's a good time to comparison shop."

Some of the more obvious checking costs include the following:

• Bounced-check charges.

Fees for not maintaining sufficient funds to cover your checks now average $25.80 per returned check, up from $21.57 five years earlier, according to a 2003 study by Bankrate.com.

• ATM-related fees.

If you use another bank's ATM, you could face a surcharge from that bank. The fees average $1.40 nationwide, up from 89 cents five years earlier, reports Bankrate.com. That's in addition to a fee charged by your bank for the same transaction averaging $1.29, up from $1.08 five years earlier.

"Coupled together, you could pay about $3 per transaction if you use the wrong ATM," McBride said.

• Monthly service fees.

The trend is toward higher costs on interest-bearing accounts, where fees average $10.86 a month for people who fail to meet the minimum balance, up from $9.29 five years earlier. Incidentally, the typical balance needed to earn interest on checking accounts averages $2,258, reports Bankrate.com. That's up from $1,561 five years earlier.

Some of the above fees clearly don't apply in all cases. Washington Mutual, for example, doesn't charge either customers or non-customers to use its ATMs.

But it will pass along the fee if its own customers use somebody else's ATM and that entity charges Washington Mutual for the transaction, said Jim Linker, a consumer-banking regional manager for Washington Mutual in Phoenix.

Banks also vary in providing services such as returning canceled checks for free.

For example, Bank of America recently sent notices to certain "express" checking customers saying it would no longer return all checks for free, though customers can request up to two free canceled checks each month and download all the check images they want from the company's Web site.

Washington Mutual will return all canceled checks for free to customers who want them, but the bank recommends against the practice because of identity-theft dangers, Linker said.

"It's risky because the checks could get stolen (from a mailbox)," he said.

Some companies offer free checking with no balance minimums for people who opt for direct payroll deposit or automatic deposit of Social Security checks. Banks like direct deposit because it "guarantees activity in an account and solidifies the customer relationship," said Stephen Johnson, a senior vice president at M&I Bank in Phoenix.

• On the Web: To check out bank fees and rates for checking accounts and ATMs, go to www.bankrate.com.