When it comes to checking accounts, all banks are not created equal.
According to the Pew Charitable Trusts, Ally Bank, Charles Schwab Bank (SCHW), First Republic Bank (FRC), Citibank (C) and Bank of America (BAC) top the list for consumer-friendly policies, based on its review of checking account disclosures, overdraft fees and dispute resolution policies at 36 of the nation's 50 biggest banks.
These five banks did the best job of informing consumers about checking account fees and terms clearly and concisely. They also minimize the overdraft fees consumers are hit with if they overdraw their account, and let customers take disputes to court rather than requiring them to waive their right to a jury trial, Pew found.
But even out of the highest-rated banks, none had perfect scores in every single category.
Ally Bank, an online bank, was a top pick because it doesn't charge overdraft fees when customers overdraw accounts at an ATM or during point-of-sale purchases. Ally also doesn't engage in the practice of reordering transactions from highest to lowest dollar amount when processing them, in order to maximize the number of overdraft fees it charges. But it didn't do so well in other areas. Pew found that Ally doesn't provide a grace period before charging overdraft fees, and doesn't provide a clear summary of checking account disclosures, for example.
"All banks showed there's room for improvement," said Susan Weinstock, director of Pew's safe checking project.
Fourteen banks couldn't even be ranked because details about their account policies aren't available to the public without visiting a branch in person.
The lowest-rated banks included First Niagra Bank (FNFG), KeyBank (KEY), Union Bank (MTU), Sovereign Bank (SAN) and First Tennessee Bank (FHN). A full list of individual bank ratings can be found on Pew's website.
Sovereign Bank ended up on the bottom largely due to its overdraft policies. Pew found that Sovereign reorders transactions from highest to lowest amounts to boost overdraft fees. The bank also charges overdraft fees when an ATM withdrawal leads a customer to overdraw their account -- something many of the higher-ranked banks don't do, according to Pew.
Union Bank, meanwhile, was found to have some of the worst account disclosures. Pew said it fails to provide an easy-to-understand summary of its terms and fees and isn't clear about overdraft options and fees.
Union Bank and Sovereign Bank didn't immediately respond to requests for comment.
Pew recommends that the Consumer Financial Protection Bureau, the government's consumer watchdog, introduce new rules requiring banks to clarify their disclosures and provide clear and fair overdraft options. It also wants the bureau to require banks to charge overdraft fees that are "proportional" to what it actually costs a bank to provide the service. Finally, Pew urges the agency to ban banks from including mandatory binding arbitration clauses in checking account agreements, which are typically meant to prevent consumers from taking legal action against a bank.
"Better clarity and transparency for checking accounts will make this market more competitive and, as a result, more efficient," Pew stated in its report. "The [CFPB] has the authority to require changes to this fundamental marketplace, so that all consumers will have access to banks serving their customers through best practices."
Checking Account Check-Up: How Does Your Bank Rank?
With the various incentives to use credit and debit cards, cash can often seem like an afterthought. After all, obtaining, tracking, and toting it can seem more hassle than it's worth. But if credit-card swiping is turning into mindless spending with month-end statement shock, it might be time to switch from plastic back to paper.
A once-weekly withdrawal from a no-fee ATM can help keep spending on everything from incidentals to luxury items in check. Want to take it up a notch? Try budgeting and paying cash for purchases larger than the daily latte: groceries, gas, mass transit tickets, or an evening out.
Bank of America offers its customers the chance to Keep the Change. The premise is simple. For every purchase a customer makes with his or her debit card, Bank of America will round up to the nearest dollar, and deposit the difference into your savings account. The bank will even match the difference for the first three months, up to $250. The catch? B of A charges a $12 monthly maintenance fee for customers who don't use direct deposit or maintain a $1,500 minimum balance.
The old-school alternative? A mason jar and a daily ritual of emptying pockets and purses of any loose change left over after paying for items with cash.
There's something inherently charming about the old Holiday Club and Vacation Club accounts. They call to mind days when every $5 received in a birthday card was squirreled away; when banks still gave out toasters, and lined their counters with jars of lollipops.
It might sound quaint, but the discipline works. Socking away a few dollars a week over the course of several months to help fund a vacation or holiday shopping adds up. The cash out at the end of the term is like winning the lottery -- one lump sum comprised of tiny, barely noticeable amounts throughout the year.
Previous generations knew their banker by name, knew his or her children's names; they swapped stories, were part of the same community. While it's temping and convenient to complete most banking transactions online or rush in and out of a branch when needed, what's lost is a personal connection that email alerts and social-media posts simply can't replace.
There are tangible benefits to getting to know local branch staff. Having a face-to-face connection with bank staff can be helpful in resolving charge disputes, being kept abreast of rate changes, and getting information on specially tailored products.
Before the days of the large international bank, most people had their financial needs met at the corner savings and loan. If big banking has lost its appeal, seek out smaller, local banks, many of which aren't publicly traded, or credit unions, which are not-for-profit. The difference between these two types of banks and large, publicly traded ones is that banks that don't have to appease shareholders can focus on its customers first.
According to the Independent Community Bankers of America, local banks focus on "personal service, local credit decisions and ownership, and reinvestment in the community." And according to the Credit Union National Association, credit unions exist to provide financial literacy for their members, serve the needs of their members regardless of means, and offer lower rates than traditional large banking models.
While no one would recommend stashing savings under a mattress or issuing I.O.U.s for groceries, adopting some old-fashioned tactics for financial management might be just the ticket to thriving in the modern world.