THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Monday, October 9, 1995 TAG: 9510070334
SECTION: BUSINESS WEEKLY PAGE: 11 EDITION: FINAL
TYPE: Cover Story
SOURCE: BY TOM SHEAN, BUSINESS WEEKLY
LENGTH: Long : 219 lines
When Mitchell Fine was shopping for a checking account, one factor he considered was the level personal service at local financial institutions.
``The bigger banks have gotten impersonal,'' said the president of the Norfolk-based retailer Fine's Men's Stores Inc.
That and the lower fees were the reasons why Fine chose an account at a Norfolk savings bank over the accounts available from larger, statewide banks.
The bank, he says, waived its monthly service charge on his checking account because he already had a home loan with the institution.
Faced with another increase in the monthly service charge on his checking account, John Flanigan of Virginia Beach talked a few years ago with friends about the fees they paid for their accounts.
``I thought the bank was trying to raise its profit margin on me alone,'' says Flanigan, who moved his account from a large regional bank to a Virginia Beach-based credit union.
Personal service and convenience are still important considerations when individuals shop for a checking account. But some consumers say they compare checking-account fees more closely than they once did.
Steadily rising maintenance fees and service charges, along with the greater variety of accounts available, have complicated the shopping process. But taking the time to compare accounts is worth the effort, says Stephen Brobeck, executive director of the Consumer Federation of America.
``A family that does not shop for an account can spend more than $200 a year on checking services,'' he says.
The same family, says Brobeck, can cut its checking expenses significantly by doing two things: One is keeping enough of a balance in an account to avoid the monthly service charge. The second is not bouncing checks.
In a recent survey of bank accounts and service charges at 271 banks in 23 states, the consumer advocacy group U.S. Public Interest Research Group determined that the annual cost of maintaining a regular checking account had climbed 10 percent since 1993 to $202.
Meanwhile, the average monthly maintenance fee for a regular checking account was up 22 percent to $7.11, according to the group's research.
BUNDLED ACCOUNTS
While raising their checking-account fees, many institutions also have offered consumers more ways to avoid a monthly maintenance fee. Many will waive the fee if a checking customer has some other relationship with the bank, such as a savings account, a home loan or credit-card balance.
``That's one of the best ways to get a break on bank fees,'' says Ed Mierzwinski, consumer program director at the Public Interest Research Group. ``Ideally, you want to use a high balance in another account to offset your checking fees.''
First Union Corp., the Charlotte-based parent of First Union National Bank of Virginia, has been especially aggressive at promoting variations of its checking account.
By providing several options, First Union hopes to solidify its ties with customers as their needs change over the years, says William J. Slayton, the bank's area president for Hampton Roads.
FREE CHECKING
The practice is less prevalent than it was in the late 1980s and early 1990s, but some banks in the region promote free checking to entice new customers. Since opening for business, Bank of Hampton Roads has offered its customers a year of checking without a monthly maintenance fee.
``We need to gather deposits, and for a community bank, gathering deposits is more of a challenge than finding qualified borrowers,'' says Jack W. Gibson, president and chief executivce officer of the Chesapeake bank.
Other banks, including Central Fidelity Bank, offer free checking as a way to promote accounts that do not return a customer's cancelled checks. The practice of holding onto cancelled checks, called check truncation, reduces an institution's processing and postage costs.
ECONOMY CHECKING ACCOUNTS
In an effort to fend off check-cashing regulations from Congress and make checking more available to low-income households, many banks began offering economy checking accounts during the 1980s. The accounts typically have a lower maintenance fee that allows about a user to write about a half-dozen checks a month. For each additional check, there is a charge of 25 to 75 cents.
Last year, the Federal Reserve reported that the proportion of American families with some type of bank transaction account had climbed to 87.5 percent in 1992 from 85 percent in 1989. Brobeck of the Consumer Federation of America attributed part of that increase to the availability of budget checking accounts.
INTEREST-BEARING ACCOUNTS
But another type of checking account - those that pay interest - have lost some of their appeal in recent years with the general decline in interest rates.
``Interest rates are so low that there are better investment vehicles to use than interest-bearing accounts,'' says Phillip Richards, assistant vice president of marketing and strategic planning at Naval Air Federal Credit Union in Virginia Beach.
ATM IMPORTANCE
For an increasing number of consumers, the availability of automated teller machines has become more important than the hours or locations of bank branches.
Because he has his paychecks deposited directly and uses ATMs for cash withdrawals, ``I don't get into a bank anymore,'' says Jody Lewis, a 28-year-old Virginia Beach resident.
The lack of its own ATMs became hurdle when Life Savings Bank stepped up efforts to attract individuals like Lewis.
``As we tried to market our checking program, we kept bumping into the problem,'' says Nelson R. Arnold, senior vice president and head of retail banking at the Norfolk thrift. ``That was especially true for people in the 20-to-40 age group.''
Life dealt with the problem by joining two teller-machine networks, which provided its customers with access to other institutions' ATMs. Life also decided to absorb the cost of its customers' ATM transactions.
Bank of Hampton Roads began installing its own teller machines three years ago after encountering the same demand for convenience.
While shopping for a checking account, individuals would ask, ``Do you have ATMs?'' Gibson, the bank's president, recalls. ``When we said we didn't, they'd leave for another bank.''
CREDIT UNIONS
For some consumers in search of less costly checking service, credit unions have become an alternative. Once known for paying higher yields on savings and making low-cost car loans, many of these financial cooperatives have broadened their services during the past decade by offering credit cards and home loans.
Eligibility for membership in a credit union is still restricted by common-bond requirements, such as employment at a certain company. But many credit unions, including several in Hampton Roads, have broadened their membership by adding companies and organizations to their initial field of membership.
When shopping for low-cost checking, ``a credit union is your best bet,'' says Ed Mierzwinski of the Public Interest Research Group.
BROKERAGE FIRMS
Another alternative is an asset management account with a securities brokerage firm.
These accounts bundle together a money market mutual fund with a securities account and checking-writing. They include a debit card that enables its user to withdraw cash from bank teller machines. With this type of account, a brokerage firm gathers up excess cash from dividends and transactions and sweeps it into the customer's money market account. Side bar to Cover Story QUESTIONS TO ASK
Checking accounts and check-related service charges have gotten more complicated, but it's worth shopping for one that fits your needs. Here are some topics to consider. Does the banks have branches close to where I live or work?
Despite the proliferation of automated teller machines and automated telephone banking services, the availability of a branch is still important when choosing a bank.
Do I rely on an automated teller machine for cash?
If so, the number of ATMs that a bank has and their locations may be more important than the hours and locations of a bank's branches. Make sure the bank has an ATM convenient to where you live or work. If you travel frequently, choose an institution that belongs to an ATM network, such as Plus or Cirrus, that links teller machines elsewhere in the country.
How many checks do I write each month?
If you write fewer than a half dozen, consider using a budget or economy checking account. The service charges for these no-frills accounts are substantially lower than those on regular accounts. However, the cost of using a basic account can climb quickly if you write several more checks than the stated maximum.
Do I need my cancelled checks?
Some institutions offer free checking or less expensive checking if they do not have to return a customer's cancelled checks. If you use one of these accounts and need a copy of a cancelled check, banks can provide one.
Do I routinely keep a high balance in my checking account?
If so, you may want to use a checking account that pays interest. However, the rates on these accounts are modest. Unless you need a large cushion in your checking account, it would be better to use a regular checking account with a modest balance to avoid the monthly service charge. The additional funds can be deposited in a higher yielding, short-term certificate of deposit.
Do I already have a savings account or a loan with a particular bank?
Several banks in the region waive the monthly checking service charge if a customer maintains some other relationship with the bank, such as a savings account, an auto loan, home loan or credit-card balance.
Do I have a complicated banking situation that may require help from bank personnel?
If so, the level of a bank's personal service will be more important than the availability of ATMs or the convenience of branches. Check with friends and business associates about the level of service they received from their banks. ILLUSTRATION: Color cover staff graphic by John Earle.
Go Fish !
Staff color photos by Jim Walker.
The lack of its own ATMs became a problem when Life Savings Bank
stepped up efforts to attract customers in the 20-to-40 age group.
"As we tried to market our checking program, we kept bumping into
the problem," says Nelson R. Arnold, senior vice president and head
of retail banking. Life dealt with the problem by joining two
teller-machine networks.
By providing several options, First Union Bank hopes to solidify its
ties with customers as their needs change over the years, says
William J. Slayton, area president for Hampton Roads.
Staff graphic by John Earle
How to use this chart
These are some key features to consider when comparing the
institutions listed on the chart.
[For complete text, see microfilm.]
[Listing of area banks, thrifts and credit unions. It compares
services offered at each bank. Including: Number of branches in
Hampton Roads,Branches open on Saturday, budget checking, regular
checking and interest checking, cost of checks, returned checks fee,
stop-payment fees, ATMs]
For copy of graphic, see microfilm.
KEYWORDS: BANKS SURVEY HAMPTON ROADS < by CNB