Despite reforms, many charges are not clearly disclosed
The average checking account has 30 fees, a new study finds, and
one-fifth of U.S. banks still don’t provide a list of these charges
before a customer submits an online application.
Capital One and Fifth Third Bank, a regional bank based in Cincinnati, were the only two banks to earn perfect scores for transparency in the survey. Fewer than half (48%) of major banks had well-marked, direct links from their checking account product pages to a full summary of fees. Worst rated were the 20% of banks that fail to provide a list of checking account fees on their product pages. Among them are HSBC Bank, Huntington National Bank, USAA Federal Savings Bank, Sovereign Bank, and M&T Bank, the survey found.
A spokeswoman for Sovereign Bank says the group improved the clarity of its fee disclosures last week to make checking accounts easier to understand by offering “simpler and more transparent fee disclosure information” in line with recommendations by The Pew Charitable Trusts’ “Safe Checking in the Electronic Age” project.
For their part, banks say they’re working on increasing fee transparency. “Avoiding fees is often as simple as maintaining a minimum balance or using direct deposit,” says Mike Townsend, a spokesman for the American Bankers Association. A spokesman for Huntington Bank says it’s working on integrating its disclosures into the account products pages, and an HSBC spokesman says customers wishing to open an online checking account must first confirm they’ve read account fee disclosures.
However, the manner in which major banks inform customers about the costs associated with their checking accounts remains confusing, Papadimitriou says. They list different fees in different places online, call them by different names, and don’t always highlight the most important fees, the study found. Regulatory bodies have spearheaded some improvement, making disclosures shorter and somewhat easier to understand, Papadimitriou says, “but there’s obviously still work to be done.”
A spokeswoman for Sovereign Bank says the group improved the clarity of its fee disclosures last week to make checking accounts easier to understand by offering “simpler and more transparent fee disclosure information” in line with recommendations by The Pew Charitable Trusts’ “Safe Checking in the Electronic Age” project.
For their part, banks say they’re working on increasing fee transparency. “Avoiding fees is often as simple as maintaining a minimum balance or using direct deposit,” says Mike Townsend, a spokesman for the American Bankers Association. A spokesman for Huntington Bank says it’s working on integrating its disclosures into the account products pages, and an HSBC spokesman says customers wishing to open an online checking account must first confirm they’ve read account fee disclosures.
However, the manner in which major banks inform customers about the costs associated with their checking accounts remains confusing, Papadimitriou says. They list different fees in different places online, call them by different names, and don’t always highlight the most important fees, the study found. Regulatory bodies have spearheaded some improvement, making disclosures shorter and somewhat easier to understand, Papadimitriou says, “but there’s obviously still work to be done.”
Consumer advocates say they’ve repeatedly urged regulators to require prominent and smart disclosure of fees online, and to offer downloadable bank fee data and easy-to-read bank-account-shopping guides. In fact, less than half of 250 bank branches surveyed last year fully disclosed fees to prospective customers on the first request, while 12% provided no fee information at all, according to the nonprofit Public Interest Research Group’s most recent survey on the issue, Big Banks, Bigger Fees 2012.
To be fair, many of these fees are only triggered by certain behaviors, like going below a required balance threshold or bouncing a check, banking experts say. And although most checking accounts come with fees, they’ve traditionally been considered a loss-leader for banks, says Ben Woolsey, spokesman for credit-card comparison site CreditCards.com. “They’re regarded as a gateway account — to serve as platform to obtain higher-margin business from the customer, like mortgages and car loans,” he says.
Still, banks are under pressure to generate more revenue from checking accounts, Woolsey says. Bank customers who sign up for overdraft protection services, for instance, tend to have significantly higher annual fees, according to a separate study by the Consumer Financial Protection Bureau.
To be fair, many of these fees are only triggered by certain behaviors, like going below a required balance threshold or bouncing a check, banking experts say. And although most checking accounts come with fees, they’ve traditionally been considered a loss-leader for banks, says Ben Woolsey, spokesman for credit-card comparison site CreditCards.com. “They’re regarded as a gateway account — to serve as platform to obtain higher-margin business from the customer, like mortgages and car loans,” he says.
Still, banks are under pressure to generate more revenue from checking accounts, Woolsey says. Bank customers who sign up for overdraft protection services, for instance, tend to have significantly higher annual fees, according to a separate study by the Consumer Financial Protection Bureau.
