Study Finds Widened Gap in Bank Fees

Intensifying the debate over rising bank fees, a study released Thursday says consumers at big banks now pay on average $218 a year for a checking account--almost $30 more than small banks charge.

The survey, by the California Public Interest Research Group, found that banks and savings and loans of all sizes nationwide had boosted fees for products and services, including access to tellers and telephone calls to obtain account information. But CalPIRG’s report concludes that multi-state banks and other large institutions were stepping up the fees more sharply and making it even tougher for consumers to avoid them by setting higher minimum balance requirements than smaller banks.

“Merger-mania is making the fee-gouging big banks even bigger,” said Jon Golinger, who prepared the study. “The fees are the biggest and quickest way to boost profits higher.”

Large banks and bankers’ groups criticized the study, saying it was flawed and that it disregarded the alternatives consumers have to avoid fees.

“It’s unfair and unreasonable of PIRG to suggest that fees are a major, significant aspect of profitability of banks,” said John Stafford, a spokesman for the California Bankers Assn., which counts most of the 330 banks in the state as members. Stafford said that service fees last year constituted 6.4% of the total revenue at all California banks, up slightly from 1995 but down from 7.1% in 1994. Nationwide, banks receive less than 5% of their revenue from fees.

However, smaller banks and consumer groups seized on CalPIRG’s study, which follows numerous reports about the widespread growth of surcharges for automated-teller machine use. In the last year, more banks have imposed these fees--typically between $1 and $2 each time a non-customer uses their ATM.

While the ATM surcharges have raised public rancor and prompted legislative action, CalPIRG’s study showed that banks and savings and loans have been boosting fees and tacking on new charges for a wide variety of services.

The survey of 419 banks and S&Ls; in 29 states, including 18 institutions in California, found that customers at big banks were paying 5% more, $2.69, for savings accounts than two years ago. At smaller banks, however, monthly maintenance fees for savings accounts actually fell 16% from 1995, to $2.22.

Similarly, smaller banks tended to charge smaller fees for maintaining interest-bearing checking accounts and for using other banks’ ATMs. In California, big banks were also much more likely to charge for making too many telephone inquiries, closing accounts early and access to tellers.

In CalPIRG’s study, big banks are those whose deposits would put them in the top 300 institutions nationwide.

CalPIRG also said big banks raised the minimum-balance requirement on average 14% from 1995, to $642. By contrast, the minimum to avoid fees at smaller banks declined by 11%, to $492.

In estimating the annual average cost of maintaining a checking account, CalPIRG assumed that customers failed to meet minimum balances, made 25 withdrawals from other banks’ ATMs, bounced one check and had one deposit item returned.