IT seems that the banking industry has put Americans in a financial Catch 22.
If they don't meet the monthly balance requirement for checking accounts, they are forced to pay a fee. And if they use more than a certain number of checks each month or fail to use their own bank's automated teller machine, they must also pay a fee.
In 1990, United States banks had 96 different fees, says Chris Meyer, staff attorney at the New York Public Interest Research Group (NYPIRG). Now they have more than 250.
Not only are there more fees, but the fees consumers pay for banking rose at more than twice the rate of inflation in the past two years - a period when banks racked up record profits. These are the findings of a national banking survey by the United States Public Interest Research Group (USPIRG) in Washington.
"Banks have devised a three-part strategy to gouge consumers," Mr. Meyer said Tuesday at a press conference announcing the results of the survey. "They raise existing fees, invent new ones, and make it harder to avoid fees by raising minimum balances," he says. "This results is more people paying more fees."
This also creates eye-opening profits for the banking industry. According to the Federal Deposit Insurance Corporation (FDIC), commercial bank profits jumped from $32 billion in 1992 to $42 billion in 1993. Last year's profits reached an all-time high of $44.7 billion.
In its defense, the industry says part of the reason for the fee increase is to pay for the high cost of automation. "Banks are very technology driven, and they are spending a lot of money in order to provide more electronic and telephone banking, speedier service, and 24-hour service lines," says Karen Brough, spokeswoman for the Consumer Bankers Association, a Washington-based trade group.
"Banks are just doing what consumers demand of them - to make banking faster and easier," she adds.
Fees are also a constant source of revenue, adds Ross Waltrip, a senior financial analyst with the FDIC. "Since the banking industry's main risk factors, net interest margins and losses, are cyclical, fees become attractive to banks due to their fixed nature," he says.
The USPIRG survey analyzed savings- and checking-account fees at 271 banks in 25 states and the District of Columbia from April 1993 to April 1995.
Among the study's findings:
*The annual cost for an interest bearing or NOW account rose by 11 percent to $219. Monthly maintenance fees rose 14 percent to $8.64.
*Average monthly balance requirements, which consumers must meet to avoid annual checking fees, rose 30 percent to $1,242.
Check-bouncing fees have also skyrocked. "Banks are charging 7-1/2 times more than it costs to process bounced checks," Meyer says. Philadelphia, the city with the highest check-bouncing fee in the country, charges $30, he says.
But some banks contest the results of the survey.
According to Susan Weeks, spokeswoman for Citibank, these figures just do not add up.
"Our fees have not gone up in two years, and we have eliminated all of our ATM and electronic-banking fees," she says. "So I do not know where they are getting their information from."
Jennifer Kohn, at New York's Office of the Public Advocate, says that while there is a lot of focus on the banking industry, there is very little focus on what the industry is doing to help the working class.
"The best banks tend to be small and local," she says, "but people cannot get to them because they aren't centrally located."
"Consumers should look to banks that cater to individual and family accounts and avoid larger banks that try to appeal to commercial entities," advises Marc Wurzel, chief of staff to Fred Serullo, commissioner of New York's Department of Consumer Affairs.
"It's like buying a car, you have to find a bank that caters to your needs," he says.
Although New York ranked in the bottom third (19th out of 26) of the USPIRG survey, it ranked in the top 10 in basic, no-frills checking accounts. NYPIRG, in cooperation with the Department of Consumer Affairs, pushed through legislation last year to make banking easier for people with less disposable income.
A public outreach program, called Lifeline Basic Banking, unique to New York, gives consumers the opportunity to open low-fee accounts at any bank, Meyer says. The program, which went into effect in February, requires these accounts to have an opening deposit of at least $25 or more, a minimum balance of one cent, and a monthly maintenance charge under $3.
While Meyer warns that banks charge fees to people who make more than eight transactions a month, Lifeline seems to be working - for those who know about it, he says.
"Unfortunately, the basic banking bill does not include a mandate to force the banking industry to promote this new legislation," Mr. Wurzel says.
"We have been going to community groups and they don't have a clue about Lifeline," he says. "Once we tell them about it, people march down to their bank and switch into these accounts."