If you’re in the market for a new checking account, you should have an easier time comparing fees. A new study from the Pew Charitable Trust found that a growing number of banks are simplifying their account disclosures — making it easier for consumers to quickly scan a list of fees.
However, once you settle on a new account, watch out for fee gouging. The same study also found that a large number of banks are still nickel-and-diming their customers. For example, some banks continue to reorder transactions so that you get dinged for multiple overdrafts. Others charge additional overdraft fees when you wait too long to replenish an account.
“Checking accounts are a fundamental tool for managing money and they need to be safe and transparent,” said Pew’s Susan Weinstock in a press release. But according to Pew’s latest review of checking account practices, some banks make it riskier and more expensive to bank with them — especially if you’re short on funds.
The good news, according to Pew, is that a larger number of banks are adopting simpler, easier-to-read disclosures. More transparency means consumers are less likely to get bogged down by inscrutable terms when they’re trying to shop around for new accounts.
For example, among the 44 banks scrutinized by Pew, 43 percent have adopted a simplified disclosure box that summarizes key terms — up from 22 percent in 2013. A larger number of banks are also posting their disclosures online, according to Pew, so that consumers can shop around from home.
The bad news is that checking accounts are becoming increasingly expensive, according to multiple reports. Many banks still ding customers with questionable fees, said Pew.
For example, Pew’s latest survey found that around half of the banks studied still reorder transactions from largest to smallest when processing multiple transactions. So if you make several small-dollar transactions while there are still plenty of funds in your account, then make one big transaction that triggers an overdraft, you could wind up with several overdraft fees, even though you only overdrew your account once. That’s because the bank processes the largest transaction first, which eats up your available funds. Once your account dips into the red, any transactions processed afterward will trigger an overdraft fee — regardless of when the purchases were made.
The Pew report also found that a growing number of banks are charging extended overdraft fees, which are charged when you let your account linger too long in the red.
In addition, many banks are making it more expensive just to have a checking account. According to a 2013 survey from Bankrate, checking account fees surged to a record high, thanks in part to heftier ATM, overdraft and monthly maintenance fees.
Free checking accounts are also much harder to find these days — especially if you’re only looking at major banks. For example, the number of free checking accounts available to customers of major banks dropped to 38 percent last year, according to Bankrate’s 2013 survey. In 2009, 76 percent of all accounts were free.
Checking accounts aren’t just more expensive these days; it’s also become much harder to hold banks accountable for misbehavior, according to Pew. A growing of banks are slipping mandatory arbitration clauses into consumers’ account agreements, which means that if you are wronged by a bank, you can’t sue them in a traditional court. Instead, you have to go through an alternative dispute resolution process that consumer advocates say rarely benefits for consumers.
Pew also found that a growing number of banks are adding clauses barring consumers from taking part in class action lawsuits — further minimizing their risk for bad behavior.
Your bottom line
Make sure you thoroughly read an account’s terms and conditions before you sign up for a new account. If you don’t like a particular bank’s practices, you can easily walk away.
Credit unions typically offer accounts with lower fees. So you may be better off looking closer to home for a new place to park your cash.
You can also get a closer look at individual bank practices by taking a closer look at Pew’s report, which compares 44 of the 50 largest banks in the U.S.