Checking Account Transparency Report: How Easily Can Consumers Shop for a Checking Account Online?
Checking accounts have become a staple in the average consumer’s financial arsenal. Today, more than 100 million checking accounts are active in the United States, according to the FDIC. That’s unsurprising, given the versatility of this banking version of a Swiss Army knife, which allows consumers to make everyday purchases, directly deposit their earnings, withdraw cash as needed as well as pay bills and perform account management online – all with one account.
While one might expect a healthy dose of parity in the market for such a ubiquitous financial instrument – particularly when it comes to account disclosures or something as simple as the way fees are listed – that’s unfortunately not the case. In fact, the opposite is true, as consumers face disclosure practices that resemble the Wild West. The result: the industry rakes in more than $30 billion in overdraft-fee revenue annually, and 80% percent of overdrafters think financial institutions need stricter regulations in this regard.
The central goal of this report was to evaluate pricing transparency within the checking account market through analysis of issuer websites. We analyzed offers from the 30 largest banks and 5 largest credit unions that offer online checking account applications. Our analysis sought to answer the following essential questions:
- Visibility of Major Fees on Product Page: Are key checking account fees disclosed up front?
- Accessibility of Fee Information: Can the consumer easily find fee disclosures on the website?
- Clarity of Fee Information: Once an applicant finds fee information, how easy is it to digest?
We scored one eligible account from each institution on a 30-point scale, with 10 points allotted for each major category.
- The average checking account has approximately 25 total fees. As was the case in previous years, the variance in disclosure policies made it hard for us to determine the precise number of fees associated with each checking account, but most institutions fall in the 20 - 40 range, with some reaching nearly 50 total fees. The sheer number of different fees associated with checking accounts prevents effective product comparison and decreases the likelihood that consumers will find the best checking accounts for their needs.
- A general lack of uniformity continues to exist across institutions in terms of how disclosures are formatted, the language used to describe fees and the extent to which different fees are delineated. This significantly inhibits consumer rate shopping efforts.
Transparency Score By Institution
- Surprisingly, traditional banks offer the most transparency regarding key account terms, while online-only accounts provide less visibility than their branch-based brethren.
Transparency Score by Account Type
Tips for Choosing a Checking Account
Checking accounts might seem mundane, but the number of options you have to choose from and their general lack of pricing transparency can make the selection process quite difficult. Keeping the following pointers in mind as you compare your options will help lead you to the best deal.
- Read The Fee Schedule Thoroughly: The number of checking account fees that banks disclose on their product pages varies greatly from one bank to another. Absence of a fee from the product page does not necessarily mean the fee is $0. Consumers should always review the fee schedule before opening an account to avoid any surprises in the future.
- Don’t Expect Consistency: Unlike credit card offers that all have to use uniform disclosures of fees like the Schumer Box, there is nothing similar for checking accounts. In recent years, many large banks have adopted a summary disclosure form designed by the Pew Research Center to make fee disclosure practices more uniform and straightforward. However, not all have adopted it. And of the ones who have, there are discrepancies among their disclosures. Unfortunately, checking account disclosure practices resemble the Wild West.
- Remember Not All Fees Are Disclosed: The number of fees listed by banks in disclosures varies from 20 to 40. Consumers should be aware that there are banks that disclose only a part of their full list of fees initially, another part during the application process and the rest after the consumer has signed up for the account. Watch out for language like “A full/complete fee schedule will be provided after sign-up.”
- Evaluate Your Practical Needs: As evidenced by the number of fees that checking accounts charge, they offer a plethora of services ranging from straightforward ATM withdrawals to international wire transfers. You must therefore consider what exactly you’ll need from your checking account in practical terms. For instance, how much money will you hold in your account at any given time? Do you need a debit card, a physical checkbook, or an accessible local branch? How many ATM withdrawals will you make each month? The answers to such questions will eliminate certain checking account offers from contention and will dictate which fees you should focus on minimizing.
- Cast A Wide Net: When you begin your search for a new checking account, start broad and refine as you go. That means you should avoid entering the search process with any preconceived notions, such as the particular institution you’ll get your account from, how large of a bank you wish to do business with, the necessity of in-person banking, etc.
- Use Other Accounts Too: A checking account will enable you to receive direct deposit of your monthly checking account, automatically pay monthly bills, and benefit from ad hoc access to cash. You can’t use a checking account for everything, though. You might therefore want to strategically supplement your checking account with an attractive savings account and/or credit card offer in order to make your financial management as efficient and rewarding as possible.
Visibility of Major Fees on Product Page
Clarity Of Fee Information
Alliant Credit Union will be making changes to its product pages starting in September. As a result, scoring from this study may no longer be entirely applicable beyond that point.
Year-Over-Year Transparency Score
Financial institutions that were included in this study for the first time in 2015 are not represented in this chart.
In this study, we analyzed checking accounts (as of Aug. 14, 2015) with an online application component for 30 of the largest U.S. consumer-facing banks and 5 of the top credit unions, based on asset volume. Where institutions offered multiple checking accounts, we reviewed the account with the most basic features. We gathered the basic information for our report from the websites of each of the 35 institutions and confirmed the information with every institution, except for State Employees Credit Union (refused to participate) and U.S. Bank (missed data verification deadline). Scoring of each institution was based on the methodology below and in some cases involved our subjective judgments.
We scored each of the 35 institutions on a 30-point scale and allotted 10 points each for Visibility of Major Fees on Product Page, Accessibility of Fee Information and Clarity of Fee Information. Our assessment of checking account disclosures is limited to fee information only. We did not review the transparency of account terms and conditions outside of fees. Additionally, though some institutions may disclose additional information once a consumer signs up for a checking account, for the purposes of our analysis, we did not include any disclosure information that was not available to the consumer prior to the application process.
Visibility of Major Fees on Product Page: Are key checking account fees disclosed up front? – 10 points maximum.
Most people don’t have the time or patience to comb through fee disclosures to try and compare each fee from several institutions. Instead, a more practical approach is to visit a few websites and compare the most common fees — the ones they are most likely to encounter on a monthly basis — listed on the product pages.
We reviewed the product selection (i.e. the page that usually comes up when you select “Checking Accounts” from the homepage) and product details pages associated with each checking account to determine whether consumers have access to five key fees prior to clicking the “Apply Now” button (info disclosed in a different tab was given full credit as long as the tab was very prevalent at the top of the page). Points were subtracted for key fees that were charged but not disclosed up front. Institutions were given full credit if there was no charge associated with that fee. We applied half credit for any key fee listed on a clearly organized 1 to 5 summary disclosure page or in a footnote, with the exception of the fee for ordering checks, which received full credit. For example, if the overdraft fee was not listed on the landing or summary page but was listed on a clearly marked two-page summary of fees document, one point was awarded.
- 2 points = Monthly fee disclosed up front or free
- 3 points = ATM fees (in-network, out-of-network and international) disclosed up front or free
- 2 points = Overdraft fees disclosed up front or free
- 1 point = Online bill pay disclosed up front or free
- 1 point = Paper statement disclosed up front or free
- 1 point = Fee for ordering checks disclosed up front, or in summary disclosure page, or free
In cases where a particular fee is not applicable to the products offered by a given institution, scores were adjusted to reflect this.
Accessibility of Fee Information: Can the consumer easily find fee disclosures on the website? – 10 points maximum.
Most institutions link to their disclosure pages from the product details pages. In some cases, those links were bolded and located at the middle of the page. In others, the links were in small print and more difficult for consumers to find.
The Accessibility of Fees category was scored on a 10-point scale using the following criteria:
- 5 points = Based on the location of the link, within the product details page, pointing to either the comprehensive summary fee disclosure or full disclosure
- 5 points = If the link is very prominent at the top of the page or close to the "Apply Now" button
- 3 points = If the link is prominent, but listed on a side bar or the user has to scroll down to find it and is not in close proximity to the “Apply Now” button
- 1 point = If the link is listed in the footnotes of the page
- 0 points = If the link is not provided on both the product selection page and product page
- 2 points = If the font size of the link is normal (if less than 12 pixels, the font was considered small)
- 1 point = If a link to full fee disclosure was provided (applies only when a comprehensive summary was used for scoring)
- 1 point = If links go directly to the respective disclosure. We did not penalize institutions that require an extra step for location-based disclosures
- 1 point = If the summary is labeled as such, in order for consumers to be aware that there also should be a full disclosure (applies only when summary is used for scoring)
A summary of fees page was considered to be comprehensive if it included the following fees: monthly fee, all ATM charges (i.e. in-network, out-of-network and international), overdraft charges (insufficient funds and extended overdraft included), online bill pay, paper statement and wire transfer fees. If a portion of these fees was found on the product details pages, and the remaining fees were included as part of the summary disclosure, we considered the disclosure provided to be comprehensive.
Clarity of Fee Information: Once you get to the fee information, how easy is it to digest? – 10 points maximum.
We analyzed the “readability” of the fee disclosures (either within the full disclosure or within a comprehensive summary, when available). Points were subtracted for including multiple account types on one disclosure, small print, the length of the disclosure as well as the general organization of the document
- 2 points = Based on the number of accounts listed in the fee disclosure
- 2 points = If the disclosure listed fees for only one account
- 0.5 points = If the document listed more than one account
- 0 points = If the document could not be located
- 2 points = Based on font size of the fee disclosure
- 2 points = If information in the disclosure is listed in normal size print (if less than 12 pixels, the font was considered small)
- 0.5 points = If font used was small
- 0 points = If the document could not be located
- 3 points = Based on the length of the fee section in the disclosure
- 3 points = If disclosure is up to 3 pages long
- 2 points = If disclosure is 4 pages long
- 1 point = If disclosure is 5 pages long
- 0.5 points = If disclosure is more than 5 pages long
- 0 points = If disclosure is missing
- 3 points = Based on the general organization of the document
- 3 points = If disclosure is very well organized (i.e. similar to the design proposed by Pew)
- 1.5 points = If disclosure has average organization
- 0.5 points = If disclosure is poorly organized
- 0 points = If disclosure is missing
Total Number of Fees : In calculating the total number of fees, we did not include fees that we considered to be extraneous to the basic services associated with a checking account. Fees excluded from the count include safety deposit box-related fees, personalized checks/specialty debit cards, gift cards, legal charges for garnishments, tax levy or child support, and coupon and bond-related fees.
The inconsistency in disclosure policies made it impossible for us to confidently report on the specific number of fees associated with each account, as we were never certain if Bank A had more fees listed than Bank B or whether Bank A was simply disclosing more fees up front. As a result, we chose to report only the approximate average number of fees associated with a checking account.