Nobody needs a reminder to be kind to the elderly. It's just common sense and it's good business too. Banks like to tout their “senior” checking accounts as bargains, but are they really?
That's the question The Pew Charitable Trusts examined in its report, Still Risky: An Update on the Safety and Transparency of Checking Accounts. The Pew Safe Checking in the Electronic Age Project looked at checking accounts offered by the 12 largest banks and 12 largest credit unions. Four banks and one credit union offered special checking accounts for seniors. Pew compared each senior account to the institution's basic checking account.
What did they discover?
“Some of the special checking accounts tailored to seniors do not offer significant benefits and one senior checking account may in fact cost seniors more money depending on the balance they maintain in the account,” says Susan Weinstock, project director of Pew's Safe Checking in the Electronic Age Project.
One of the banks Pew studied offered a senior account that cost more than their basic account unless the customer maintains a high balance. At that institution, seniors pay a monthly fee of $25, compared to $12 for a basic account, though both accounts allow customers to waive this fee with a minimum balance – $5,000 for seniors, compared to $1,500 for the basic account. The monthly fee is waived for the basic account with a direct deposit of $250 a month, but this isn't an option for the senior account. So a senior account customer can expect to pay between $156 and $300 more per year in monthly fees if they fail to maintain a $5,000 balance, says Weinstock.
According to Pew, for seniors who do not meet the minimum balance requirements to waive the higher monthly fee, it is unlikely these perks will cover the additional cost of the account. Though for some seniors, this may be a worthwhile tradeoff, others may be better served by choosing the bank's basic account, Pew concludes in its report.
At some institutions, senior accounts are in fact, quite similar to basic checking accounts and do not offer many additional benefits. At one institution, according to Pew, the only difference is an unspecified discount on check reorders. The service fees that some institutions waived, tend to be those that are somewhat meaningless, such as when you need a cashier's check or to print a record of the last several transactions at an ATM. Pew found that opting for a simple senior account is cheaper than the standard account, but not significantly.
Pew also looked at low-cost/low-fee accounts, which offers seniors both lower required monthly fees than a basic checking account and lower minimum balances to waive that fee entirely. There was one account that charged seniors a higher monthly fee $10 vs. $3.99 for a basic account, but unlike the basic account, the senior account allows that fee to be waived by maintaining a $250 balance. Pew estimates that seniors could save $48-$96 a year with this type of account, depending on the balance they maintain. These accounts also include miscellaneous fee waivers for things like check images and discounted checks.
What's the bottom line? “Seniors should not assume a senior account is the most appropriate for their needs. Shop around,” says Weinstock.
Greg Daugherty, executive editor of Consumer Reports agrees. “A so-called 'senior' checking account might be a good deal, or it might just be a marketing gimmick.”
The best way to shop for a checking account is to figure out how you plan to use it and then look for a bank and account type that will meet your needs at the lowest monthly cost, ideally zero, says Daugherty.
Sign up for direct deposit. This is a condition to waive fees for many bank accounts, says Jean Ann Fox, director of financial services at the Consumer Federation of America.
Avoid interest-bearing accounts or accounts with extras bundled. These are not ideal, unless you are certain that you can keep the required higher average balance or other conditions for avoiding higher monthly fees, says Fox.
Get the facts. What are the fees, terms, and conditions? “What are the minimum balance requirements? Can fees be waived? Are there limits like the number of checks you can write or the number of ATM withdrawals you can make? Do you earn interest? What are the perks?” asks Ruth Susswein, deputy director, national priorities for Consumer Action. Closely compare the conditions in a senior account against a basic account.
Remember it's about you. Think about what matters most to you. For example, if you're someone who likes using customer service, is it free or is there a cost? Maybe you prefer paper statements, will there be a charge for that? The key question, says Susswein, “Does the account provide what you need and at what cost?”