Watchdogs Say Bank Fees ‘Defy Gravity’

Fees charged by banks on checking and savings accounts have “defied gravity” for the past two years, with many charges rising by more than double the inflation rate, a consumer advocacy group charged Tuesday.

“Today in 1995, bankers have their hands buried even deeper in our wallets than they did in 1993,” Ed Mierzwinski of the U.S. Public Interest Research Group told a news conference in releasing a fee survey conducted by the group.

The report came as bank regulators agreed to slash the premiums that banks pay to insure deposits, a move that should save the banking industry more than $4 billion a year.

But bankers defended their account fees, saying competition is fierce and that consumers should shop for the lowest charges. They also argued that the quality of service has gone up.

U.S. PIRG has conducted several fee surveys in recent years. The latest covered 271 banks in 25 states and the District of Columbia from April, 1993, to April, 1995.

The survey’s sample includes 37% of the country’s 300 largest banks and 41% of total bank deposits.

It found that:

* The average annual cost of maintaining an interest-bearing checking account rose 11%, to $219.24 from $197.49, or double the 5.5% inflation rate for the two-year period.

* The monthly maintenance fee for such an account, which makes up a large part of the total cost, increased 14%, to $8.64 from $7.56.

* The annual cost to maintain a regular checking account increased nearly 10%, to $201.94 from $184.16.

* The monthly maintenance fee for a regular checking account jumped 22%, to $7.11 from $5.82.

* Maryland, Florida, the District of Columbia, North Carolina and Illinois had the highest fees in the survey.

* Hawaii, Idaho, New Mexico, Maine and Washington had the lowest fees among the banks surveyed.

“These findings are particularly outrageous since all available industry and government data show conclusively that bank costs are declining or rising much more slowly than fees are being increased,” said Janice Shields, a co-author of the report.

The report comes as banks have been enjoying record profits the last three years.

Moreover, regulators Tuesday approved an 80% cut in the premiums banks must pay for federal deposit insurance. The reduction is expected to save the industry $4.4 billion a year. Bankers said the cut could mean lower fees or fewer fee hikes, among other things. But they made no promises.

Instead, the American Bankers Assn. urged consumers to look around for the best fees, to ask bankers plenty of questions and to reassess their banking services periodically.

“There are some great deals out there. We want people asking questions,” said the ABA’s Virginia Stafford. “You’re really getting more for your money now than you were getting a few years ago.”