THE Cambridge Portuguese Credit Union recently lost Christina Colbath's business.
``I chose the credit union for its low fees,'' says Ms. Colbath, who had banked at the Cambridge, Mass., credit union for about two years. ``And then it raised its fees on its basic checking account and on ATM use. So I switched banks.''
Meet the model banking customer. Consumer advocates and banking industry representatives agree that consumers must be more vigilant than ever to avoid unnecessary bank fees. And they must be willing to change banks when fees rise.
The total income from service charges almost doubled between 1985 and 1992, increasing from $7.3 billion to $14.1 billion, according to Federal Reserve data. Service charges now account for about 4 percent of bank operating income.
``Bank fees are skyrocketing,'' says the Consumer Federation of America (CFA) and US Public Interest Research Group (US PIRG). The groups call these costs - which range from charges for ATM use to penalties for closing an account - excessive and burdensome for middle- and lower-income consumers.
Bankers do not agree. ``Consumers must shop around for the best [banking] services,'' as they would for other retail products, says Virginia Stafford of the American Bankers Association (ABA). ``There are ways to avoid fees altogether if you shop around.'' Most banks offer low-cost checking accounts designed for lower-income customers, Ms. Stafford adds.
Higher charges for bounced checks ($11-$30) and money orders (about $2), higher minimum balances for no-fee checking, and penalties for using ``foreign'' ATMs (around $1) have become standard.
On top of these are new charges, such as paying to receive canceled checks (around $2), to transfer money from one account to another within the same bank (around $2), to close an account early ($10-$25), or to speak to a person instead of a machine (around $1). Banks also build fees into new products: Shawmut Bank charges $1.50 a month to use its new Convenience Plus card.
What customers pay for fees often depends on where they live. An April 1993 CFA/US PIRG survey of 300 banks in 23 states found that Washington, Virginia, Florida, New York, and California had some of the highest charges.
According to the survey, the average annual cost of a regular non-interest-bearing checking account has risen to $184.16, an 18.5 percent increase since 1990.
Stafford of the ABA calls this estimate a ``worst case scenario.'' In the ABA's annual 1993 survey of commercial banks nationwide, it found that when customers did not maintain minimum balances, median monthly service charges on checking accounts ranged from $2.50 for a no-frills ``basic banking'' account, to $8 for NOW and money market deposit accounts.
Choosing a checking account becomes increasingly confusing if a customer cannot maintain a high minimum balance. At the American Security Bank in Washington, for example, a customer can open a checking account that requires no minimum balance, 49 free checks a month, and free ``home'' ATM use. But the customer receives no interest and pays a fee of $12 a month. Or a customer can choose an interest-bearing checking account with a $500 minimum checking balance (or a $1,500 minimum savings balance), a 40-cent fee for a check or ATM debit, and a $5 a month fee for falling below the minimum balance.
Fees on bounced checks, instead of just being a deterrent, have become a profit center for some banks, says the Bank Rate Monitor, a financial newsletter.
The Bank Rate Monitor surveyed 120 of the largest banks and thrifts in the 12 largest United States metropolitan areas. It found that average fees ranged from $11.05 in Los Angeles to $28.90 in Philadelphia. The cost to banks of a bounced check is less than $1, says Janice Shields, an associate professor of accounting at Bloomsburg University in Pennsylvania and a banking adviser to the CFA.
Consumers are using ATMs more, and paying more. The average fee for withdrawing money from a customer's ``home'' ATM rose from 27 cents in 1990 to 30 cents this year, according to an ABA study. The cost for withdrawing money from a ``foreign'' ATM rose from 85 cents to $1.
``The banks are gouging customers,'' Ms. Shields says. But ``customers select banks by location; they are not quick to change banks. Most customers never question banks on fees.''
``Banking is a business,'' Stafford counters. ``Banks don't operate in a vacuum. We cannot set prices without regard to consumer demand or customers will go elsewhere.''