An assistant professor of social welfare and director of financial inclusion from the University of Kansas recently concluded a study on the safety and affordability of checking accounts. His team found that very few banks offer safe and affordable checking to customers. On top that, some even charge steep rates and overdraft fees.
Yet another aspect the study revealed was that bank staff often reserve the discretion over charging overdraft fees. It tried to understand if those having low to moderate income could actually afford checking and whether banks were complying with set standards.
Vis-à-vis affordability and safety guidelines, banks missed the mark drastically. Just about nine percent met the affordability and safety guidelines.
1600 American Banks were Picked up for Study
Data of randomly picked 1600 American banks were studied by the assistant professor and his team. The banks were questioned about their strategies for retailing such as multilingual services, extended hours, costs and services, identification criteria needed to create an account, overdraft fee policies, and minimum amounts required to open accounts.
A prominent fact uncovered from the report is that majority of banks lack an entry-level, basic checking or transaction account which fulfil the criteria set in the 2017-18 Bank On National Account Standards. In addition, bank branch managers and tellers often find it difficult to explain the overdraft policies of their banks. Besides, they often reserve the discretion to charge a fee for overdraft.
When it comes to entry-level checking, the study found that just 3% banks have an account that does not consist of check-writing privileges. It also uncovered that around 19% of banks have entry level accounts whose minimum opening deposit is less than or equal to US$25.