May 28, 2000

Small banks rallying against FleetBoston, but size talks

By Bruce Mohl

Bruce Marks is no dummy.

Even as he leads protests against the checking account fees of FleetBoston Financial Corp., he has opened an account at a Wainwright Bank branch in Jamaica Plain. Like many other smaller banks in the Boston area, Wainwright has checking accounts with balance requirements and fee schedules that beat the pants off the much-larger FleetBoston. But Wainwright goes a significant step further, offering free use of the 2,174 automated teller machines in the SUM system.

Wainwright is a perfect example of a little bank that is stepping up and competing with the big guys. Some other banks, including Century Bank, Eastern Bank, and a host of much smaller credit unions, have taken steps in the same direction.

But these institutions appear to be the exception rather than the rule. Consumers fed up with FleetBoston, Citizens Bank, and Sovereign Bank can easily find a better checking account at any number of smaller banks, but all too often they can't find the same level of convenience.

Some numbers tell the story. The FleetOne Classic checking account requires a $2,000 average daily balance or a $4,000 combined savings/checking balance or the customer pays a $10 monthly fee and 25 cents per check or ATM transaction. For every check or ATM transaction beyond 50 in a statement period, whether the customer meets the balance requirement, the cost is 50 cents apiece. Online banking with unlimited bill paying costs $4.50 a month.

A host of smaller banks offer better terms. Most credit unions offer totally free checking. Century Bank of Medford has just introduced free checking and Eastern Bank of Lynn has it available on the South Shore and in Boston.

Many other banks offer what might be called nearly free checking, requiring only direct deposit, for example,

to avoid any fees. Wainwright's Value Checking account fits in this category. It has a $500 minimum balance requirement that can be waived with direct deposit from any source. If the minimum balance is not maintained or waived, the fee is $3 a month and 25 cents per check. There is no charge for point-of-sale or ATM transactions. Online banking is coming to Wainwright in July, with no charge for unlimited bill paying.

Comparing just the accounts of FleetBoston and Wainwright, the edge would have to go to Wainwright. But comparing size and convenience, FleetBoston has the advantage. It has 343 branches and 1,400 ATMs in Massachusetts, while Wainwright has six branches (three in Boston, three in Cambridge, and one coming in August to Watertown) and a total of 12 ATMs at those branches.

But Wainwright takes much of the advantage away from FleetBoston by in effect making the SUM system of ATM machines its own. It's the same consumer-friendly approach that USTrust employed before it sold out to Citizens.

Wainwright customers can use any of the 1,750 SUM machines in Massachusetts (that's 350 more than FleetBoston) and face no charge. If they use an ATM outside SUM, they may be charged by the bank that owns the machine but they won't be charged by Wainwright.

Some credit unions, like the Cambridge Portuguese Credit Union, do what Wainwright does and swallow the charges assessed by the NYCE banking network (between 41.5 and 47.5 cents per transaction) when one of their customers uses another bank's ATM. A handful of banks, including Century and Eastern, eat those charges a few times during each customer's statement cycle.

But most other small banks charge their customers $1 to $1.50 if they use another bank's ATM, even if the ATM is part of the SUM system. Banks call the charge the foreign ATM fee, or network withdrawal fee.

David Mendeloff, a Cambridge resident and MIT graduate student in political science, thinks many of these smaller banks who assess foreign ATM charges mislead consumers by advertising that they offer "free" ATMs or stressing that their ATMs are surcharge-free.

Mendeloff is an old USTrust customer who began looking for a new bank when USTrust was acquired by Citizens. He ended up at Cambridge Trust Co., which offers free checking with direct deposit. Cambridge Trust's at-a-glance account information brochure notes: "ATM surcharges will not be imposed on Cambridge Trust customers who use their cards at other SUM participating banks."

Mendeloff assumed that meant he wouldn't be charged any fees if he used ATMs in the SUM system. When he started getting hit with $1 charges by Cambridge Trust, he wrote a letter of complaint to the bank's president, James F. Dwinell III.

"I really don't like being misled, nor do I like being nickel-and-dimed in this way. In fact, I opened an account at your bank precisely to avoid that," he wrote.

In his response, Dwinell pointed out that the SUM system was set up to prevent surcharges by other banks, not charges by the customer's own bank. He largely dismissed Mendeloff's complaint and accused him of "unfair and irrational behavior" by sending copies of his letter to the Globe and the Better Business Bureau without contacting the bank first.

But a bank spokesman acknowledged that many consumers are confused by the bank jargon in regard to ATM fees and said the bank plans to revise its brochure on checking accounts immediately to spell out the $1 foreign ATM charge clearly.

Officials at most small banks I contacted said they can't afford to swallow the network bank fees associated with customers using another bank's ATM. But not Wainwright.

"We're small. We're growing. We've made a decision not to charge because it's an issue near and dear to the consumer's heart," said Steven F. Young, senior vice president of the consumer banking group. "Maybe we're not as greedy."

Even with its free-ATM policy, however, Wainwright still isn't as convenient as FleetBoston. It has far fewer branches and its customers can't deposit money at SUM machines, although the Massachusetts Bankers Association is planning to launch a SUM-like system this summer that would accept deposits.

If more banks followed the Wainwright lead, said Marks, chief executive of the Neighborhood Assistance Corp. of America, he would give up the FleetBoston protest and urge consumers to switch rather than fight. But he's not doing that for two reasons.

First, he believes FleetBoston dominates the market and sets the fee bar so high that other banks can raise their rates and remain "competitive." Sovereign Bank, for example, offers a free checking account in Pennsylvania but it won't be offering one here next month when it absorbs 500,000 Fleet Bank customers (see more below).

Second, the SUM system is great on paper but pretty thin in some areas. Roxbury, for example, has only two SUM ATMs, and only one of them, the one located at Boston police headquarters, is open 24 hours. FleetBoston has two branches and nine ATMs in Roxbury.

"There is not a real alternative to Fleet right now," Marks said.

SOVEREIGN'S FREE CHECKING OMISSION

Sovereign Bank's ads are clever. "On June 19," the ads say, "over 500,000 lucky people throughout Massachusetts will be switched from their old bank to the new Sovereign Bank New England." In fine print comes the kicker: "The rest of you will just have to change banks on your own."

What Sovereign doesn't mention is that those lucky 500,000 former Fleet Bank customers won't have access to a popular free checking account that Sovereign offers in its home-base area of Philadelphia.

A Sovereign spokeswoman declined comment on why the free checking account isn't being offered here. But Marks said Sovereign's decision not to offer the free-checking account here is proof of FleetBoston's negative impact on the market.

He says Sovereign is only offering accounts that are similar or slightly better than FleetBoston's because that's all it has to do to attract customers. If FleetBoston had lower fees, Sovereign would be forced to offer better terms as well, Marks said.

This article is reprinted here for non-commercial, educational, fair use purposes only.