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Checking Account Policies Still Stink

The Pew Charitable Trusts is again taking big banks to task, and rightfully so, for high checking account fees and murky account policies.

The not-for-profit group put the big banks’ checking account practices under the microscope and found plenty of red tape and an abundance of extra charges.

Nationally, some 89% of checking accounts carried monthly fees, the median monthly fee was $12 and it took an average minimum daily balance of $2,000 to have the fees waived, according to the study “Still Risky: Bank Fees and Disclosures in the States.”

To top it off, you’d have to wade through a median of 69 pages to read all the terms and conditions associated with the accounts, the study found.

Pew examined the checking account policies of the 12 largest U.S. banks, which accounted for nearly half of all deposit volume as of October 2011.

Those banks are: Bank of America, Wells Fargo, JPMorgan Chase, Citibank, U.S. Bank, PNC Bank, TD Bank, SunTrust, BB&T, HSBC Bank USA, Regions and Capital One.

The study gives both a broad look at nationwide trends and a state-by-state analysis, which shows that account fees, minimum balance requirements and disclosure length vary greatly. (Find the study at pewstates.org.)

Susan Weinstock, director of the Pew project Safe Checking in the Electronic Age, says because one state may have only one of the big banks, while another may have 10, it’s impossible to do a head-to-head comparison to determine where fees and terms are the most onerous.

Monthly checking account fees ranged from $5 in Alaska to $15 in Massachusetts, and in the vast majority of states, you needed to keep between $1,500 and $5,000 in your checking account to get the monthly fees waived. (The study did not look at direct deposit as a means to waive fees).

The report also looked at the most common types of fees, such as ATM fees, overdraft fees and fees to close an account as well as other fees that can be tacked onto an account, such as a fee for depositing too many coins, Weinstock says. Pew conducted focus groups and found consumers “really wanted to know all the fees associated with an account.”

As a result, the nonprofit drew up a simple form highlighting the most common checking account terms and conditions, which has since been adopted by 14 banks and credit unions.

Now Pew wants the Consumer Financial Protection Bureau to adopt rules that would mandate uniform checking account disclosure boxes, similar to what’s on your credit card statement; require clarity in overdraft policies; set reasonable overdraft fees; and prevent banks from reordering transactions when a consumer makes multiple overdrafts so the banks can collect the largest fees possible.

All 12 banks already reorder withdrawals or reserve the right to do so without notice.

This means that if you have $100 in your checking account and make three purchases at Starbucks for $5 each, and later in the day make one at Target for $98, you could get hit with four overdraft charges if the bank chooses to reorder withdrawals from the largest to the smallest, instead of chronologically.

A typical overdraft fee is $35.

If the CFPB adopts such regulations, consumers will have an easier time shopping around for a checking account.

“The important thing here is transparency,” Weinstock says.

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