No-fee checking still a choice in Pittsburgh region

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The number of banks offering free checking accounts has been drying up nationwide in recent years, but consumers in Pittsburgh looking for no-minimum-balance accounts continue to have a sea of choices.

Seven of the region's top 10 banks offer free checking, a Pittsburgh Post-Gazette survey of local banks shows. That compares with eight banks in the 2012 survey and nine two years ago.

PG graphic: Bank account fees
(Click image for larger version)

Meanwhile, a survey late last month by the financial website Bankrate.com found that the percentage of banks nationwide with free checking fell to 38 percent, down from 39 percent last year and 45 percent in 2011. It was the fourth straight yearly decline since the number peaked at 76 percent in 2009.

Banks have been cutting back on free checking and looking for other ways to make up for lost revenue squeezed out by new regulations in 2011 and 2010 that capped debit card swipe fees and barred banks from charging overdraft penalties for debit card purchases unless customers expressly opted in for overdraft coverage.

In the Pittsburgh region, free checking remains plentiful with PNC Bank, Citizens and First Niagara the only ones among the top 10 not offering free accounts.

This summer, banking giant and market leader PNC announced it was phasing out free checking (except for people 62 and older), joining No. 2 Citizens and No. 5 First Niagara, which had jettisoned free checking in prior years. PNC stopped free accounts for new customers in mid-August and will phase them out for existing customers by next June.

Even so, customers at PNC, Citizens and First Niagara can still get a no-minimum account by jumping through a few hoops.

PNC will waive the minimum for customers who make $500 in direct deposits per month. At Citizens, customers can qualify by conducting five transactions a month, including ATM withdrawals, debit card purchases, checks and online bill payments. At First Niagara, it takes 10 debit card transactions or direct deposit of a paycheck or other recurring check. First Niagara also has free checking for students.

Overdraft fees

On the down side, customers of Pittsburgh banks are paying higher-than-average overdraft fees and, like the rest of the country, are seeing what little they have been earning on deposits shrink even further.

Overdraft fees average $35.85 a pop among the region's top 10 banks, ranging from a high of $37.50 at Huntington to a low of $31 at Northwest.

That compares with an average overdraft fee of $32.20 in the nationwide Bankrate.com survey.

The most common overdraft fee locally is $37, but three local banks -- Citizens, Huntington and First Commonwealth -- offer customers a small break by charging a lower fee in the $22 to $25 range for the first overdraft per year.

Besides those per-item overdraft fees, all of the banks except for Northwest and ESB charge an additional fee that kicks in when an account remains overdrawn for a certain number of days. For example, PNC charges $7 per day starting on the fifth day that an account is overdrawn, up to a maximum of $98, while S&T charges $10 per day, also starting on the fifth day.

No. 6 Huntington is unique in the region for giving customers a 24-hour grace period to get their accounts into the black before assessing any fees.

The bank also offers free automatic transfers from savings to checking accounts to cover a negative balance, something other banks typically charge $10 to $15 to do. As of mid-September, First Commonwealth also started offering that service for free.

Losing interest

With interest rates hovering around historic lows, depositors have been getting used to near-imperceptible returns on their money.

Over the last year, returns fell even further.

The average annual yield on interest-bearing checking accounts among the top 10 banks here slipped to .027 percent, down from .028 percent last year and .06 percent in 2011. That works out to about $1.35 in annual interest on a $5,000 balance.

Even customers with bigger balances, which typically qualify for higher rates, didn't fare much better. The average return on the top-yielding deposit account -- excluding certificates of deposit -- was .34 percent locally, down from .46 percent last year and .625 in 2011. That works out to about $68 a year in interest on a $20,000 deposit.

Among the 10 local banks, Dollar Bank offers the highest yield, paying 1.2 percent on the first $20,000 and .5 percent on balances between $20,000 and $250,000 for customers with the bank's FreeMoney accounts. PNC, meanwhile, pays .4 percent on balances of up to $100,000 for customers in its Virtual Wallet Performance Select accounts.

At the low end, Citizens and ESB's highest-earning accounts pay just .1 percent.

For someone with $20,000 on deposit, the difference would mean roughly $240 in annual interest at Dollar, $80 at PNC and $20 at Citizens or ESB.

Other fees

While banks have been looking for ways to raise new revenue to make up for the swipe fee and overdraft shortfalls, certain areas have remained off limits.

Two years ago, several of the country's biggest banks tested new debit card fees but customer backlash forced the banks to cancel their plans.

According to the Bankrate.com survey, just 4 percent of checking accounts nationwide charge debit card fees at the point of sale, while less than 1 percent impose a monthly or annual card fee.

Locally, none of the top 10 banks charges account-holders debit card fees. Customers also can use their home bank's automated teller machines for free.

Some banks nationwide have been eliminating programs that reward customers for using their debit cards to cut costs. Locally, six banks offer debit card rewards, down from seven last year.

businessnews - yourbiz

Patricia Sabatini: psabatini@post-gazette.com or 412-263-3066. First Published October 12, 2013 8:00 PM


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