Retail Fees of Depository Institutions, 1997-2001

Article excerpt

With passage of the Financial Institutions Reform, Recovery, and Enforcement Act in 1989, the Congress directed the Board to report annually on changes in the availability of retail banking services and in the level of the associated fees. The first survey on retail fees and services commissioned by the Board under the new law was conducted in 1989, and the results were reported in 1990. The most recent report, covering 2001, was released in June 2002.

Each year the reports present estimates of the proportion of all depository institutions that offer various services, the proportion that charge a fee for these services, the average level of the fees, and the changes in these estimates from the previous year. Statistical analysis of the survey results produces estimates for the entire population of commercial banks (hereafter referred to as banks) and savings associations in the United States. Selected estimates for each of the years from 1997 through 2001 are presented in this article. (1)

Starting with the report covering fees in 2000, estimates of the incidence and levels of fees for banks and savings associations have been combined. This change was made because the similarities between banks and savings associations have increased and, most particularly, because the deposit insurance premiums paid by the two types of institution have become virtually the same. To compare estimates across years in this article, estimates of fees previously reported separately for banks and savings associations were recalculated to apply to banks and savings associations together. (2)

Because of the interest expressed over the years in the question of whether retail fees differ by size of institution, this article also examines the differences in the incidence and levels of fees charged by institutions of different sizes.

Several findings for the 1997-2001 period are noteworthy: (3)

* For the various types of checking and savings accounts tracked, monthly fees tended to rise by statistically significant amounts, as did the minimum balances that depositors must maintain to avoid the fees.

* Fees associated with special actions, such as those imposed on checks returned for insufficient funds, on overdrafts, and on stop-payment orders, exhibited increases that were statistically significant and well in excess of the rate of inflation during the period.

* In the case of fees imposed for the use of automated teller machines (ATMs), the annual fee and the fee imposed for withdrawals by an institution's depositors from the institution's own ATMs, both of which were fairly rare in 1997, became even less common by 2001. However, the more commonly imposed fees for withdrawals by an institution's depositors from other institutions' ATMs and for the use of the institution's ATMs by nondepositors (the so-called surcharge) became much more common by the end of the period, and the average levels of these fees increased by statistically significant amounts; for the surcharge, this increase substantially exceeded the inflation rate during the period.

* Comparisons of the fees charged by institutions of different sizes in 2001 (the year of the latest survey) indicate that, in general, the incidence and levels of fees were higher at larger institutions.


Because of the wide variations in the fees charged by depository institutions for various services, fees are divided into three types in the following discussion to provide a manageable way of examining the variations. These types are fees associated with (1) maintenance and use of various kinds of deposit accounts, (2) special actions such as stop-payment orders and checks returned for insufficient funds, and (3) use of ATM services.

Deposit Accounts

Analysis of the fees charged in connection with deposit accounts must, at the very least, account for the distinctions among noninterest checking accounts, NOW (negotiable order of withdrawal) accounts, and savings accounts. …