PIRG CONSUMER WATCHDOG FACT SHEET #3 Revised Oct 1999

FIGHT FEES ALERT

BANK FEE TIPS FOR CREDIT CARD AND CHECKING ACCOUNT CONSUMERS

Bankers still have their hands buried deep in our wallets. Banks are charging us more and hidden fees just to use our ATM card or checking account, according toan October 1999 PIRG Big Banks, Bigger Fees report. Credit card banks are tricking consumers into paying more and more fees and imposing higher and higher interest rates. One bank has been sued for allegedly charging customers late fees, even when they paid on time. Bank fee income from credit cards is now up to $20 billion each year, on top of $60 billion in credit card interest annually. Bank service fee income not including ATM surcharges is another $19 billion each year. 

--CREDIT CARD CUSTOMERS: Never pay the minimum payment. Always pay on time and always pay as much as you can afford. Call Bank regulators if you have a complaint. 

--BANK FEES: An October 1999 PIRG Big Banks, Bigger Fees report finds that the average consumer who can't afford to meet minimum balance requirements pays $217/year for a regular checking account, when all service fees, account fees, and ATM fees are added together. 

And, incredibly, while banks earned their eighth straight year of record profits in 1998 -- $62 billion dollars -- their well-heeled lobbyists in Washington seek to roll back banking laws that protect consumers, communities and taxpayers. Their lobbyists also seek to expand bank powers to sell and underwrite insurance and securities (stocks and bonds) without consumer protections in their proposed new law.

In October 1999, Congress approved and the President signed S. 900, THE FINANCIAL MODERNIZATION BILL--IT'S A BANK DREAM BILL AND A CONSUMER NIGHTMARE. The bill legalized the merger of Citibank with the Travelers Insurance Company and encourages similar mergers between banks, stockbrokers and insurance firms. It will lead to bigger banks, with higher fees. It has numerous other deficiencies. Worse, the bank merger frenzy will only result in higher fees, because larger banks charge higher fees than small banks and credit unions do. 

Banks have devised a three part strategy to gouge consumers. They raise existing fees, invent new ones, and make it harder to avoid fees, by raising minimum balance requirements, so more people pay more fees. And, even though banks have raised the interest we pay them on our credit cards dramatically, they haven't significantly increased the interest they pay us on deposits. PIRG reports document how banks charge consumers twice to use the ATM machine only once. 

WHAT CAN CONSUMERS DO?
(1) CREDIT UNIONS: Bank at a credit union, not at a bank. Credit unions are member-owned alternatives to commercial banks. Because credit unions are owned by their members and don't care to gouge them, their fees are generally lower than bank fees. Many larger credit unions have branches, ATM networks and offer all the services of a bank. Many companies, unions, state and local governments and communities have credit unions that you may qualify to join. If one family member qualifies, generally everyone can join. Credit union deposits are federally-insured, just as bank deposits are. 

 (2) SHOP FOR FINANCIAL SERVICES. This should be an ongoing process because banks are constantly changing their fee structures. Compare the costs of your accounts to those of other banks in your area. Know what types of transactions you regularly make and evaluate accounts with your needs as a yardstick. You may find a better deal at a different bank. If you don't qualify for a credit union account, small, locally-owned community banks generally have lower prices, and better service, than out-of-state owned mega-banks. 

Free checking: 17% of banks in PIRG's 1999 survey offer totally free checking. 

Direct Deposit: Ask your employer if you can be paid through direct deposit. The government will also provide Social Security and other benefits through direct deposit. Many banks will offer free or lower-cost checking with direct deposit, because they save so much money. 

Linked accounts: Look for banks that offer free checking or free checking with a "linked" or "relationship" balance in another account. Your savings balance -- or even a mortgage or car loan -- can offset your checking account balance requirement. 

ATMs: Large banks are exploiting their ATM networks to gouge non-customers with the ATM surcharge. If enough small bank consumers get tired of paying these outrageous fees and switch to the large bank to avoid them, then the large banks will begin to charge their own customers more fees. While most banks don't charge you if use their own machines, things are starting to change for the worse. So, use your own bank's ATMs whenever possible. If none are around, look for machines with a "NO SURCHARGE HERE" Logo. Avoid double-dipping, fee gouging, surcharging ATMs. 

Beware of NOW (interest-bearing checking) accounts. If you cannot maintain high minimum balances, stay away from NOW accounts. The high fees on NOW accounts may cost you more than it's worth to earn the low interest on your balance. 

Explore no-frills checking options. If you write few checks each month, look at no-frills flat fee checking accounts. This is particularly important if you cannot meet minimum required balances to avoid regular checking account fees. However, watch out for no-frills accounts with punitive over-the-check-limit and bounced check fees for no-frills accounts. Bank consultants regularly recommend low check limits, high per-check fees, and, special, higher, bounced check fees for these accounts. 

IN YOUR LETTERS, MAKE THESE RECOMMENDATIONS:

(1) URGE LIFELINE BANKING: Bigger banks means bigger fees. But 12 million families cannot afford bank accounts. An addition 48 million have average balances below $1000 at any given time. These families need access to better bank accounts. Congress should require banks to offer low-cost lifeline accounts, as only New Jersey and New York require. 

(2) URGE PRIVACY PROTECTION: The financial powerhouses created by the new law have the right to share and sell your customer information with virtually no right to privacy. See PIRG's privacy alert for more information. 

(3) URGE CONGRESS TO REGULATE UNFAIR CREDIT CARD PRACTICES: Contact your Representative and urge co-sponsorship of bills similar to last year's HR 900 (LaFalce, D-NY), which would toughen up credit card regulation. Urge your Senators and Representative to oppose the one-sided bankruptcy legislation that was vetoed in December 2000, or at the lest, to add balancing provisions to regulate the credit card industry:  For example,

1) Require banks to tell you on your credit card statement exactly how long it will take to pay off your credit card balance if you only make the minimum payment.
2) Ban the deceptive use of the term "FIXED RATE." So-called fixed rates are a joke banks play on consumers to trick them into paying higher more interest. The rates change.
3) Stop banks from charging a fee if you pay a credit card bill on time.