WASHINGTON-Consumers should "Bank at a credit union, not a bank," according to U.S. Public Interest Research Group (U.S. PIRG) Consumer Advocate Ed Mierzwinski. The consumer advocacy group recently released the results of its 2001 bank fee study in which credit unions come out on top. According to U.S. PIRG, consumers could save $75 a year by doing business through a credit union or a small bank than a large bank. The study found that the average annual cost of a regular checking account at the 300 largest banks was $266, while small community banks charged $191 and credit unions only $101. While the rate dropped 6% at small banks, credit unions' fee rates dropped 10%. "In 2001, the best deal, for consumers who qualify for membership, is still at member-owned credit unions," the study concluded. Not only are large bank fees going up, but smaller banks and credit unions are dropping, further increasing the cost spread, or what U.S. PIRG called the "Big Bank Fee Gap." The annual cost difference between small and large banks jumped from $32 in 1999, when the group last did the study, to $75 for 2000. Banks are also `unbundling' their services and charging a separate fee for each. In 2001, the average monthly maintenance fee for consumers who could not meet the minimum balance at large banks was $8.40, as compared to $7.76 in 1999. However, when cancelled check and monthly ATM card usage are added to the monthly fees, the charge increased to $9.64, up from $8.56 in 1999. At smaller banks the charge was $6.80, down from $7.12 in 1999. When services are rebundled, the fees increase to $7.32, down from $7.46 in 1999. "[B]anks hide fee increases by unbundling services formerly included in these monthly maintenance fees," according to the study. At credit unions, however, U.S. PIRG pointed out that fees are typically lower and a lower minimum balance is required. For example, the minimum balance to avoid fees averages $703 at large banks or requires an average balance of $1,355. At smaller banks, the minimum balance is $465 with an average balance of $980. At credit unions, the minimum balance averages just $345 and the average balance is $433. While smaller banks are the only place U.S. PIRG found that the annual cost index for interest bearing accounts (NOW) decreased, credit unions still outrank them in price. Smaller banks decreased their cost index from $225 in 1999 to $204 for 2001, down 9%. However, credit unions cost index was only $124 in 1999 and increased to $131 for 2001, for a 6% increase. The cost index for NOW accounts at large banks increased 11% from $239 to $266, according to the study. Free checking accounts were few and far between, particularly at banks in the Southeast. Of 57 banks surveyed in North Carolina, South Carolina, Georgia, Florida, and Louisiana, only two banks offered free checking. Nationally, 29% of banks surveyed offered totally free checking, up from 17.5% in 1999. However, 67% of credit unions offer totally free checking. Free checking is more readily available in the Pacific Northwest, the study discovered. When free checking accounts with direct deposit are factored in the percentages increase to 39% at large banks, 41% at smaller banks, and 81% at credit unions. The survey also noted that banks often tack on hidden costs that may not always be monetary with the `free' accounts. Some charge monthly for ATM card usage while others have mandatory check safekeeping, with no option to get back cancelled checks. Bounced check fees and deposit item returned fees are also two commonly charged fees at banks. The national average fee is $26.18 at large banks, compared with $23.08 two years ago. The average at all banks is $23.79, up 8% from 1999. According to U.S. PIRG, banks are continuing record profits, mostly on the backs of the American consumers through increasing fees. "Fee income continues to drive a significant amount of bank income," the group said, noting recent FDIC statistics on non-interest revenues. While banks' profits took a small dip in 2000, it was still the second highest year ever in profits. "In our view, the rise in fees and the increasing complexity of the fee system have created a burdensome and consumer-unfriendly banking system that places huge costs on the middle class and prices lower-income people out of the federally-insured banking market," the study said. "For these consumers, the only alternative may be even higher-priced check cashing stores. Profits from rising bank fees accrue unfavorably to big banks, which fuels their anti-competitive growth. Ultimately, all consumers face higher bank fees as the big, fee-gouging banks get bigger." U.S. PIRG recommended consumers not only use a credit union as opposed to a bank for financial services, they also recommended that consumers shop around before deciding. Additionally, the consumer group advocated a federal statute that requires banks to offer one low-cost account for consumers who write few checks each month. Also, states should create Financial Consumers Associations and the government should impose rate caps, improve disclosures, and eliminate some fees. The study encompassed 521 banks and 144 credit unions across 32 states and Washington, D.C. U.S. PIRG is also advocating the continuation of the Federal Reserve Fee Study to lawmakers. Legislation is sitting in Congress right now, not only to continue the study, but also to include credit unions in it. Mierzwinski said, "We absolutely support expanding the Federal Reserve Fee Study [to credit unions]." "Forty percent of bank income is drawn from fees, some of which can be called predatory," Congressman John LaFalce said in a press release in response to the study. "Consumers should be informed and aware of the amount they are paying for banking services, so they can shop around for the lowest fees or even for free checking accounts. That is why it is crucial that Congress renew an expired requirement that the Federal Reserve Board continue to study and disclose bank fees." [email protected]