Last year my bank got swept up in the sub-prime loan crises and was about to fail. I knew that my money was FDIC insured, but the deposit accounts were about to be taken over by another bank. Rather than simply accept whatever new bank came along to buy out my old bank, I went out and started to do some research on a new bank.
The last time that I changed banks was in 2000, and my recollection of the options back then was not good. I was an early adopter to the “internet only” style of banking, primarily because internet banking offered better than average interest rates and lower than average fees.
This time around I was prepared for a long, arduous search for the type of banking to which I had become accustom. I started my search at Bankrate.com, where I start most of my searches for banking products. I quickly found, to my surprise, that it was relatively easy to find checking and savings accounts (mostly money markets) that paid high interest rates and had very low or no fees — even at some of my least favorite institutions like Bank of America and Citibank.
It was not until I read a number of posts on some other personal finance blogs and forums that made me realize why it was so easy to find the accounts I sought: I was able and willing to carry a relatively high balance. At EverBank, where I eventually set up banking, the minimum balance required is $1500. In keeping this balance, I do not have to pay a $4.95/month maintenance fee, nor do I pay an additional $4.95 per month for online billpay.
Quite clearly, if I were living paycheck to paycheck, I would not be able to maintain this balance. As it is, I actually earn $6-$7 per month in interest on this minimum balance. As I thought more about this I realized that in my less enlightened days, I used to keep a few hundred dollars at most in my bank account. There’s no way I would have been able to maintain this kind of balance.
Many people I know, and many of the people on personal finance forums, who are struggling to get their financial houses in order are clearly unable to pay the fees associated with maintaining interest bearing accounts, or at best simply earn no interest. Earning no interest is the same as taking a loss when inflation is taken into account.
Banks clearly need to make money, but it seems to me quite regressive to make the people with the least amount of money pay these fees. The banks obviously make some money from the pass through of lending other deposit accounts at a higher rate, but would the rate suffer that much to reduce the fees, or are most banks simply being predatory? What do you think?