Nearly half of American households have a passbook savings account, but some of those accounts are more consumer friendly than others, according to a new survey by the Consumer Federation of America of 150 banks and the 10 largest credit unions.
Among the group’s findings:
— More than half of the banks did not disclose on their website the interest rate paid on the account.
— One out of 5 did not publish the monthly fees that are charged when balances fall below certain levels. Minimum balances also widely differed with 14 percent of banks requiring up to $25, about one-third requiring at least $300, and half mandating $200 to $300.
— Low interest rates were typical, with 17 percent of banks paying .01 percent or less annually. That’s no more than a dime per $1,000 deposited..
— Some banks limit withdrawals, say, three per quarter, and then charge $5 for each withdrawal thereafter.
— Banks also in some cases charge an inactivity fee of $1 to $12 if the account has been dormant six months to three years. CFA’s executive director Stephen Brobeck said one Internet bank charges $10 a month after 6 months of inactivity. In some of these cases, though, fees were waived if balances were more than $100 or $200, he noted.
It wasn’t all bad news. Some banks offer incentives, such as a higher interest rate or a cash bonus, if customers automatically transfer funds from checking to savings monthly.
Brobeck said there is little customers can do about low interest rates, although he noted that credit unions tend to pay more on deposits than banks, albeit still below 1 percent. Big banks also are more likely to require higher minimum balances and charge higher fees than their smaller peers. On the other hand, Brobeck said, big institutions are more likely to disclose fees and rates on websites and offer innovative accounts and savings incentives.
More than one-third of low- to moderate-income families have passbook accounts with the median balance of $800, the CFA said.
To encourage savings among this group, Brobeck said he would like to see the government subsidize savings accounts, so they pay 3 to 4 percent interest on the first $500 deposited. It would cost several hundred million dollars, but that’s a small sum compared to the tax breaks given to upper-income families, Brobeck said. He suggested this could be part of overall tax reform.
Frankly, given the sequestration-minded Congress, this looks like a long-shot. And it does seem from the CFA report that it’s worth consumers time to check out a credit union or even a small bank, if they want a slightly higher interest rate or want to avoid fees.