Study – There might be fewer consumer safeguards on checking accounts compared to credit cards

Almost all of us think that the terms on the checking accounts, which are one of the most widely used financial services in the US, are very simple, especially when compared to other payment options such as credit cards.However, a study conducted by the Pew Health Group reveals that customers are completely lost when it comes to their checking accounts and this result in unwanted penalties and overdraft fees.

At least 265 checking accounts have been analyzed by Pew, from 10 of the major banks and it has been found that the average checking account has a 111-page disclosure, $8.95 as monthly fee, and $35 as overdraft penalty fee, $10 as overdraft transfer fee, as well as an extended overdraft penalty fee ($25) that is charged on every seventh day from the time the account is overdrawn.

Eleni Costantine, Director of Financial Security, Pew Health Group, has stated that it was really surprising because it was really difficult for consumers to understand their checking account. This group is the consumer-product safety arm – part of the Pew Charitable Trusts. She also stated that they did not expect the lack of transparency. This was a dangerous trend as 9 out of 10 American’s presently hold checking accounts.

The report titled ‘Hidden Risks – The Case for Safe and Transparent Checking Accounts’ has suggested a list of policy recommendations in order to let the checking account holders get the same level of protection as the credit card holders with regard to the high fees.

She stated that without this information being indexed, consumers could not figure out anything in their checking accounts. Hence, if consumers cannot understand, then they will be unable to shop properly.

According to a report from Moebs Services, it has been estimated that banks will charge a total of $38 billion by way of overdraft fees during 2011 – the highest ever in the industry. The industry has already earned revenue of around $37.1 billion on overdraft fees during 2009.

Pew has recommended that the banks should ideally have a single page disclosure box for customers who hold checking accounts, in order to prevent customers from paying fees unknowingly. In fact, even the credit card companies are bound by law to publish the ‘Schumer Box’ where the companies are required to list the long-term rates such as APR or annual percentage rate and other such transaction fees.