NEW YORK – It’s getting tougher for U.S. savers to find a bank where they won’t end up paying to keep their money safe.
Average interest on savings, checking, money-market and certificate of deposit accounts fell to 0.99 percent in July, the first decline below 1 percent in a decade, according to researcher Market Rates Insight. Banks also have been raising fees and adding new ones, most recently in response to the financial-services overhaul bill that became law July 21.
The result is that an increasing number of savers are seeing their deposit earnings eaten up by charges. That’s frustrating people such as Ken Ward, who recently passed on a savings account with a 0.01 percent interest rate at the Chase bank branch near his home in Wantagh, N.Y.
“We went to Chase because of the convenience,” said Ward, 57, a stock-loan trader who was helping his daughter find a place to tuck away $10,000. “But with those rates, we might as well put it in the mattress and then at least we won’t be charged any fees.”
Had they gone with the Chase savings account, it would have paid about $1 in annual interest. Potential fees included $4 if the balance fell below $300, $2 for each non-Chase ATM withdrawal and $3 for each withdrawal after making more than four withdrawals in a monthly statement cycle.
Ward said he and his daughter settled on a 13-month Chase CD paying 0.75 percent, and will look for a better alternative when it matures.
Chase’s interest payments reflect the low-rate environment created by the Federal Reserve, according to Greg Hassell, a spokesman for the bank’s New York-based parent, JPMorgan Chase & Co. The Fed has kept the overnight interbank lending rate target near zero since the end of 2008 to stimulate the economy after the collapse of Lehman Brothers Holdings.
Unattractive rates and new fees may drive consumers to smaller banks and credit unions. Big banks such as Bank of America, the largest U.S. lender by assets, No. 2 JPMorgan and No. 4 Wells Fargo may lose about 1 million checking accounts each, based on estimates by economic-research firm Moebs Services.
The average interest rate offered on a checking account by a credit union is 0.21 percent, according to Bankrate.com, a website that tracks bank products. That compares with 0.12 percent at the five largest banks and five largest thrifts in each of the 10 largest markets.
Almost 80 percent of the 50 largest credit unions offered free checking as of April, Bankrate.com data show, while unconditional free checking is no longer offered by Bank of America, Chase, Citigroup and Wells Fargo.
Consumers looking for higher rates may also turn to online banks. DollarSavingsDirect.com, a division of Emigrant Bank, offers 1.2 percent for savings accounts with account balances of at least $1,000.
Another option, money-market funds, which aren’t backed by the Federal Deposit Insurance Corp., were averaging 0.04 percent as of Aug. 24, according to iMoneyNet Inc., a research firm that tracks money funds.
Higher fees have driven the average annual price of a checking account to $301, an 11 percent increase in the past five years, data from Moebs Services show.
“If you’re a restaurant and you can’t charge for the soda, you’re going to charge more for the burger,” JPMorgan CEO Jamie Dimon said in a July conference call with analysts.
For Chase customers, charges may come in the form of monthly fees and higher credit card rates, he said.
Wells Fargo customers will bear some of the burden for new financial regulation, CEO John Stumpf said in a July 22 interview. The bank, which is based in San Francisco and has the biggest U.S. branch network, introduced a new checking account in July with a $5 monthly fee, which can be waived if customers meet certain conditions.
