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Basic Checking Account
Basic Checking Account

Basic Checking Account

Remember the press coverage some years ago about Americans switching from big banks to community banks, credit unions and online banks? Remember National Bank Transfer Day? It was a success for credit unions but made a little dent in the consumer retail banking sector.

Changing to smaller banks maybe a good move for some people. But the fact is that some consumers need a big bank. Maybe they travel a lot for work and need to bank at a place that has branches around the country. Or maybe you have a kid in college and want to be able to put money into an on-campus account or monitor spending. The question is which big bank is right for you?

If you come to the conclusion that the banks are all the same, they all adopt the same policies, offer the same services offer the same online banking facilities, then it all comes down to fees.

To simplify matters, let’s take a look at the most basic checking account offered by the 10 largest retail banks in the U.S. and compared their fees for basic transactions and common penalties.

In some ways, the banks are remarkably similar: All but TD charge 3 percent for using a debit card for a foreign currency transaction. All except for PNC charge a monthly maintenance fee. But those monthly fees range from $2.99 to $12 and most banks offer a few ways to dodge the fee, such as getting direct deposit social security or paychecks or having a minimum balance.

When it comes to penalty fees, most banks charge around $35 for overdrawn accounts, although about half have a sliding scale so that small amounts or first-time offenders pay less. Bank of America and Citi automatically block point-of-sale debit purchases if the amount would put the account into the red.

Banks also offer cheaper alternatives: You can link your checking account to a savings account or line of credit, and if a transaction would cause you to overdraw, the money will automatically be transferred from that other account into your checking account for a smaller fee (usually in the $10-$12 range). Even with the new rules, you can still overdraw your account if automatic payments bring the balance below zero or you bounce a check, either of which will get you zapped with a fee.

There are a few other variations and quirks between the offerings. About half the banks we surveyed charge customers to close an account if it’s been open for just a few months; U.S. Bank has a dormancy fee that kicks in if you don’t use the account for a while. HSBC limits its customers to eight free check or withdrawal slip transactions a month, after which they’re 35 cents each.

We can go bank to bank to do a comparison, but this is easy enough to find online, much like credit card programs, determine what your habits are and what fees would be applicable to you and find the bank that offers the products and services that best fit your lifestyle.

Bank
Bank

Bank

With the economic slowdown and growth at a stall and the uptick of inflation and the halt in hiring and jobs creation, the major backlash results in U.S. banks lower earnings estimates.

In the past quarters, the banks, that is the major banks, the universal banks, those stretching from coast to coast or around the globe have posted incredible earnings. Many were wondering during such a bad economy how these banks were posting such huge profits. The US banks were paying back TARP money and paying off the government so that they could get out from under the rules and regulations imposed on them to receive government support.

During the banking crisis, the banks in the US continually raised service costs, fees and penalties to consumers, ATM fees were increased, returned check fees were doubled or tripled, overdraft fees became prohibitive. Free checking ceased to exist and new full service accounts became very expensive. Banks began charging for deposits, withdrawals, for any service. Too many calls to customer service had a fee, too many deposits had a fee, the per check fee just rose and rose, but all the revenue derived from these fees did not come close to amount that banks were declaring as profit each quarter.

Where were all the banks making so much money, from their business customers, from their investment side, from the highly speculative side of banking that got them in so much trouble before?

Now with this unpredicted global slowdown, the increase in the euro zone debt crisis and the talk about banks and investment firms having to take losses from structured bailouts for countries like Italy, Greece, Ireland, and Spain or Portugal, the banks are worrisome again, there is a lot of uncertainty in the markets and the banks are feeling the pain.

Investors are selling off their holdings, causing the value of the bank stocks to plummet. Equity deals and Mergers and Acquisitions are slowing down and foreclosures, and credit card debt, bankruptcies and write offs are continuing.

All painting a bleak picture for the banks, recently some of the banks have been downgraded and their earnings projections for the remainder of the year have been cut.

Bank Directors and CEO’s have been making statements over the past few weeks gently inferring that bank earnings will not reach earlier projections and banks are following up with new estimates and reduced earning. Everyone is in a cautious mode.

Until the US starts to create jobs and increases growth, until the euro zone crisis is handled and until global exports start to pick up, bank earning will continue to be reduced.

Bank Failure
Bank Failure

Bank Failure

In early September this year, the Federal Deposit Insurance Corporation (FDIC) along with government regulators issued the rules and guidelines that the big banks have to follow in producing “Living Wills.”

The new rule along with the requirements under the proposed guidelines and time table will go into effect in January 2012.

The “Living Will” will require the largest US banks, such as Citi, Bank of American and Wells Fargo to produce a plan of action to break up the bank in an effective and fiscally sound manner, in case the banks enter a crisis in the future.

These plans, entitled Living Wills or just Wills, will service as instructions and guidelines for the federal government to be able to step in and break up the bank or take over their operations if need be.

Companies with more than $250 billion in non-bank assets would be required to file the plans by July 1, 2012. Firms with non-bank assets between $100 billion and $250 billion would be required to file by July 1, 2013, and all other firms would be required to submit plans by December 2013.

This new rule would apply to approximately 37 banks, savings organization and financial institutions in the US, the rule is only for the banks that have been classified as To Big To Fail. Institutions with at least $50 billion in assets will have to file plans, as will any firm designated as important by the Financial Stability Oversight Council.

These rules have been under consideration for some time now, but since the bank failures and the crisis in 2008, the administration along with the FDIC and the Financial Stability Oversight Counsel, have made these rules a priority.

Most of the banks involved filed letters of exception with the FDIC and have retained attorneys to question the legality of these requirements, but the government is pushing this forward as it represents a great need of the public and the government to avoid a crisis like we just went through.

Bank security and confidence in American is pinnacle to our economic stability, This confidence is provided through the federal programs such as the insurance provided by the FDIC. Regardless of the banks objections, the FDIC can place requirements on institutions or withdraw their endorsement and insurance, which will spell devastation for those institutions.

Since these Wills or plans are of vital importance to the FDIC, it is clear that this rule will be implemented and on the time schedule as set forth by the Insurance Corporation.

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