Monkey see, monkey do. It happens in many industries. Big companies set the pattern and others follow them like lemmings in their product design and pricing.
Banks are no different. In cities across America, the largest institutions tend to imitate each other in what they pay consumers on their savings, charge them on loans and set as special fees.
That fact was driven home by Bank Rate Monitor’s recent survey of bounced-check charges, which today average $19.35 nationwide versus $18.58 a year ago and $15 five years ago.
Some banks reluctantly admit that bad checks (also calles NSFs, or non-sufficient funds) have become a source of profit for them, but the question is, How come rubber-check charges tend to be nearly the same, bank by bank, in many cities?
– In Philadelphia, 8 of the 10 largest banks and thrifts charge a whopping $30 to bounce a check. Yet, in New York, only 107 miles away, the average fee is just $15.60.
– Likewise, in Dallas and Houston 8 of the 10 biggest outfits in each market charge $20.
– In Detroit, the NSF fee at 9 of 10 top institutions ranges narrowly between $17.50 and $18.50.
Bank spokespeople tend to ascribe these remarkable similarities to local market conditions. “It’s an example of capitalism at its best,” says Sandra Remey, communications manager at Riggs National Bank in Washington, D.C. “We’re all competing for the same customers and the same accounts to remain competitive.”
Jill Davies, an executive vice president at Bank of Almeda in Houston, puts it more bluntly: “The smaller banks look at what the market’s doing to set their rates. We use a 12-bank survey of both large and small banks to set ours.”
That puts the onus on you to become more aggressive in your shopping.
The monkey-see-monkey-do syndrome is also apparent in some savings and checking account rates in certain metro areas.
For example, four of New York’s five largest commercial banks pay 1.25 percent on interest-bearing checking accounts; all five of California’s biggest banks pay the exact same rate, only 1 percent, on the minimum to open their accounts. But there’s at least one Los Angeles thrift, Glendale Federal, where the yield is 1.31 percent.
More sameness: Four of San Francisco’s five biggest banks offer a fixed-rate credit card, and all charge 19.8 percent, compared with a national average of 17.88 percent. Philadelphia’s three biggest thrifts market such cards, and they’re at 16.9 percent each.
Where can you find a better deal? In your same town, probably at a smaller bank or thrift:
– BRM’s researchers scoured Philadelphia and found that Sharon Savings Bank, which is based in Darby, has a $15 bounced-check fee, half what the big boys charge.
– Big New York institutions quoted an average of 2.71 percent on a six-month CD Nov. 3, but you could get 3.05 percent at Apple Bank for Savings, Green Point Savings or River Bank America. By traveling across the Hudson River, you could earn a half-point more (3.25 percent) at Hudson City Savings Bank.
– Dallas consumers pay an average of 17.14 percent and 14.29 percent, respectively, on credit cards and unsecured personal loans. But State Bank and Trust in the same market charges 13.92 percent on a credit card, and the personal loan rate is only 12 percent at Overton Bank and Trust in Ft. Worth.
– On new-car loans, Chicago’s largest outfits charge an average rate of 8.49 percent; by contrast, customers of Beverly Bank can get a loan at 6.44 percent, and those of First National Bank of Morton Grove at 6.5 percent.
Perplexing? You bet.
Your best strategy: Bank where you earn the most when you save, save the most when you borrow, and get hit by the lowest fees and charges in town. That goes for everything from check-reorder costs to ATM transaction fees. Millions of Americans don’t bother to do this. If they did, you’d see the numbers change in a hurry.
After all, you don’t want to wind up like the bank customer who wrote a $10 rubber check to the grocery store, got charged a $25 NSF fee by his bank, another $25 by the store, and another $25 when the bank bounced the same check a second time.
