Pew Charitable Trust recently warned senior citizens to scrutinize their bank’s senior checking account to ensure it truly was a good deal.
The independent, non-profit organization conducted a study that examined both banks and credit unions, citing three specific types of senior accounts typically found in the industry.
Study authors said that most cost effective of the senior accounts is the basic senior account. Similar to the basic free checking account, many of these designated senior basic accounts are only marginally cheaper than a regular checking/free account.
The next category is the low fee/low cost senior account offering lower fees than a basic account and a lower minimum monthly balance to waive the fee. The study found that although some senior accounts may charge a higher than regular checking fee; fee waiver is easy if the senior maintains a low minimum monthly balance. Pew said that seniors could save $48 to $96 per year with this category of senior accounts depending on the balance they maintain.
The third type of account appears to provide a murky area for seniors--the “senior added benefit account.” This account provides higher interest rates and fee waivers if the accountholder maintains a higher minimum balance in the account. Seniors can run into trouble if they don’t meet minimum balance requirements often paying fees from $156 to $300 more per year. Pew says that the typical basic account minimum balance hovers in the $250 range, whereas these senior added benefit accounts command a monthly average balance of around $5,000.
NBC News recently examined the senior account offered by Bank of America and found it to be deceptively higher priced than its basic checking. Based on research from the bank’s website, “Advantage for Seniors” account is $25 per month versus $14 charged for basic checking.
Both the basic and senior accounts provide a way to waive the fee, but that method is through direct deposit - often not a consideration for seniors.
"If you have $5,000, and are happy to have it sit in this account, this can be a fine deal," Susan Weinstock, director of Pew's Safe Checking Project tells NBC. "But the question is: Is the consumer in an account that best suits their needs? The point of this (research) is that consumers need to understand the terms of their accounts."
NBC News found similar problems with other big bank senior accounts--high fees if the inflated minimum balance is not met.
How Are Credit Union Senior Accounts Different Than Banks?
With more banks phasing out free checking, low fee (or free) senior accounts are being swept into the unprofitability margin as well.
NerdWallet.com conducted a study comparing senior checking at both banks and credit unions, concluding that while senior checking may be more commonplace at banks, credit unions are more concerned about delivering a low-fee or free product.
The study examined 100 credit unions and 41 banks in desired retirement destinations like Florida, West Virginia, Maine, Pennsylvania and Iowa. Conclusions were drawn such as:
Credit unions often offer either a free checking or a senior account--both free for the member.
Over 40% of the top banks offered senior checking; whereas only 20% offered it at top credit unions.
Credit unions are more likely to offer higher rates and bonus perks (such as travel, discounts on products etc.) in senior accounts.
Florida and Iowa had the highest population of retirees and financial institutions in these states are more likely to offer a specialized account.
West Virginia and Pennsylvania were least likely to offer a senior account.
In April, NerdWallet identified what it considered to be the “best senior checking accounts.” Both banks and credit unions were identified with the credit union accounts being free and offering bonus perks and benefits not found in a regular account.
Among the top, Philadelphia Federal Credit Union’s($800 million, Philadelphia, PA) “senior checking” provides higher interest and waives fees when members maintain an average daily balance of $500 or more in their account. If the member increases their minimum; their earned interest increases too.
Northwest Community Credit Union ($623 million, Springfield, OR) also likes to reward senior members with interest rate perks. “VIP Checking” is totally free, with no required minimum balance to meet or any monthly fees.
For those looking beyond dividends and fees, many credit unions offer a travel component to their senior account. Ohio University Credit Union ($245.7 million, Athens, OH) includes day and overnight trips at a discount to senior checking club members (and sometimes their friends).
Bottom line is that seniors should examine not only what the account offers in terms of fees and requirements, but they should also determine what they want from a credit union senior checking account.
Ready to begin the search? Find a credit union and inquire about senior checking today.
NerdWallet Study: Availability and Benefits of Senior Checking Accounts