Are Banks' Entry-Level Checking Accounts Safe and Affordable?

Comparing a Stratified Random Sample of Banks to Safety and Affordability Guidelines
Policy Paper
May 22, 2017

Many low- and moderate-income (LMI) consumers say that their main reasons for not having a bank or transaction account are because they do not have enough money or they cannot afford the high and unpredictable fees. These reports from LMI consumers provide the context for recent efforts to overhaul existing banking standards. These efforts begin with guidelines such as the FDIC's (2012) Model Safe Accounts and CFE Fund's (2017) Bank on National Account Standards, and seek to find ways to improve such guidelines to make bank or transaction accounts safer and more affordable for LMI consumers. Currently, these guidelines recommend an opening deposit of $25 or less, a monthly maintenance fee between $3 and $10, and no overdraft or insufficient funds fees. However, many questions remain about whether banks adopt these guidelines and how far the guidelines go to protect LMI consumers. 

In this report, we compare how the features of banks' basic, entry-level checking or transaction account compare to (and contrast with) the guidelines set forth in the 2017-2018 Bank On National Account Standards. This analysis is based on data that were gathered between March and December 2016 from a survey of a stratified random sample of 1,625 banks, which was identified from the FDIC's list of 6,186 active banks. These data represent the information that a consumer might be presented with when walking into a bank and talking to a bank representative about opening an entry-level account. 

Based on these data, our research reveals that few banks actually meet the full set of guidelines from the 2017-2018 Bank On National Account Standards. Notably, bank tellers and managers often reported the use of discretionary practices when it comes to charging overdraft fees to their consumers.