Checks and Balances: Measuring Checking Accounts' Safety and Transparency

Jun 03, 2013
  • Description

Consumers need safe and transparent checking accounts. "Access to mainstream financial services at an insured institution," notes the Federal Deposit Insurance Corp., "provides consumers with a safe place to save, conduct basic financial transactions, build a credit history and access credit on favorable terms, and achieve financial security." Previous research from The Pew Charitable Trusts' financial security portfolio also shows that having a checking account allows consumers to better weather economic storms. In addition, these accounts offer consumers the opportunity to enter the financial mainstream by providing access to a savings account and the potential to apply for and manage more sophisticated products such as credit to purchase a car or home. This report reviews the checking accounts offered by 36 of the nation's 50 largest banks according to their practices in three areas: disclosures, overdrafts, and dispute resolution. The study builds on two previous Pew reports. "Hidden Risks: The Case for Safe and Transparent Checking Accounts," released in April 2011, analyzed more than 250 distinct checking accounts offered by the retail subsidiaries of the 10 largest bank holding companies. "Still Risky: An Update on the Safety and Transparency of Checking Accounts," released in May 2012, expanded the research of the April 2011 report to include the 12 largest banks and 12 largest credit unions as determined by domestic deposit volume. This study examines and analyzes the data differently from the first two reports. First, Pew collected the checking account disclosures of the most basic account offered by 36 of the 50 largest U.S. banks based on deposit volume as reported by the Federal Deposit Insurance Corp. These 36 banks comprise almost 56 percent of domestic deposit volume. Account data from the other 14 banks in the top 50 could not be collected because the information was not available online or by mail. For this report, Pew defined bank "best" and "good" checking account practices based on its previous research in the areas of disclosures, overdraft, and dispute resolution policies and practices.