Free Checking is Rare at Big Banks, Common at Small

Date: 27 Nov 2012 | posted in: Banking | 0 Facebooktwitterredditmail

Share of Institutions Offering Totally Free Checking

While just 24 percent of big banks offer totally free checking, more than 60 percent of credit unions and small banks do, according to a new report (“Big Banks, Bigger Fees“) from the U.S. Public Interest Research Group (PIRG).

To gather data for the report, PIRG staff made inquiries at over 300 bank and credit union branches in 17 states. They found that credit unions and small banks have lower fees on average and do a better job of disclosing fees to prospective customers.

Comparison of Median Fees at Big and Small Banks

(Data from 2009 likewise show that, the bigger the bank, the higher the fees.)

PIRG also found that many financial institutions are failing to comply with the Truth In Savings Act, which requires that banks make complete fee schedules available to prospective customers. Just 42 percent of big banks provided comprehensive fee information on the first request, while 52 percent of small banks and 64 percent of credit unions did.

Share of Institutions that Provided Complete Fee Information on First Request

One potential downside of banking at a small bank or credit union is that these institutions do not have large national ATM networks like the big banks do. But PIRG found that small institutions are increasingly addressing this. The report found that one-quarter of small banks are not charging an “off-us” fee when a customer uses another bank’s ATM (compared to just 6 percent of big banks). Some small banks are even reimbursing customers for ATM surcharges (which are levied by the bank that owns the machine), allowing for several transactions per month at any ATM at no cost.

Credit unions, not surprisingly, have approached this problem cooperatively. Through a national agreement, customers of most credit unions can access more than 28,000 ATMs owned by other credit unions for free.

While smaller institutions are slightly slower in adopting the latest technologies, they do catch up.  A recent survey by the Independent Community Bankers of America, for example, found that half of local banks already offer or plan to offer mobile banking by 2013.  Most are also moving quickly to adopt remote image deposit.  Many other services, including online bill payment, credit cards, and wire transfers, are already standard at the vast majority of community banks (see this graph).

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Stacy Mitchell

Stacy Mitchell is co-director of the Institute for Local Self-Reliance and directs its Independent Business Initiative, which produces research and designs policy to counter concentrated corporate power and strengthen local economies.