The penalties banks mete out to customers who bounce checks is getting stiffer, a study shows.
The average fee banks charge for bounced checks has risen 15 percent over the past three years to nearly $20 per check, said the study by Bank Rate Monitor, a North Palm Beach, Fla. firm that tracks fees and interest rates.The study of 120 banks conducted last month showed that consumers on average pay $19.92 every time they bounce a check, compared with $17.31 in 1991.
The penalties are even higher when banks pay the check as a service to keep it from bouncing. Many banks charge customers a separate fee that is often equally as steep as the first fee if they make good on the rubber checks.
"All bank fees are on the rise," said Robert Heady, president of Bank Rate Monitor. "But bounced check fees are among the ugliest."
Bankers say the fees in part cover the cost of processing bad checks. Banks handle most checks electronically, crediting and debiting bank accounts by computer.
But when a check is returned because there aren't sufficient funds in the account, the item is handled manually, which is more expensive for the bank.
But the fees are really meant to deter customers from overdrawing on their accounts.
"It's a penalty to discourage people from misusing their checking accounts," said Fritz El-men-dorf, a spokesman for the Consumer Bankers Association, a trade group in Arlington, Va.
The amount banks charge varies widely by region, the study showed. The highest fees were charged by Philadelphia banks, which sock customers with an average of $29.10 for overdrawing their accounts. Banks in Boston and Detroit pay around $18 to $19 per check.
Banks in San Francisco charge the least, assessing on average an $11.85 fee, Bank Rate Monitor said.
Bounced-check fees will probably go even higher by the end of the year, as several banks plan to increase the charges this month and next, the survey said.