US and UK card holders: Americans won't always be prepared to pay
Getting lost in translation across the Atlantic is no rare thing – pants, not trousers, as any American would say; holiday, not vacation, as the average Brit would argue – and both countries' banking cultures are no exception. Kate Palmer looks at the checking charges facing ordinary US cardholders, and how this feature of the American banking scene could be set to change
Getting lost in translation across the Atlantic is no rare thing – pants, not trousers, as any American would say; holiday, not vacation, as the average Brit would argue – and both countries’ banking cultures are no exception. Kate Palmer looks at the checking charges facing ordinary US card holders, and how this feature of the American banking scene could be set to change
Recently US lender PNC Bank launched an offer of a credit card for travellers – boasting fee-free foreign transactions, air miles for every dollar spent on the card, and a host of ‘special offers’ for travelling Americans. The upwards of $95 price tag suggests the card’s ‘travel benefits’ are aimed at PNC’s more discerning customer.
Its top of the range card comes in at a hefty $395, although the bank says it offers a reimbursement of $200 for possible ‘airline incidents’ and a bonus of 15,000 miles with $50,000 in ‘qualifying’ purchases.
While charging a customer several hundred dollars for a card is not typical in the US, the country does have a culture geared towards paid-for accounts.
Currently 60% of US banks charge their customers for checking accounts. The average US card holder pays around $140 annually to their bank, according to a survey by Bankrate.com.
88% of accounts are free when customers qualify, for example by asking for a fee waiver or making a mandatory direct deposit, while virtually all US banks charge nonbank customers a fee for using their ATMs.
PNC’s hefty fee is further proof that, although the US and UK share a financial crisis, some retail banking names and the big two card providers AmEx and Visa – American banks can get away with a lot more when it comes to customer charges.
And it’s something US banks are keen to capitalise on. Bank of America offers fee-free checking if customers set up a direct deposit of $250 or more and maintain an average balance of $1,500, with a monthly fee of $12 if customers fail to do so.
The Chase basic checking account has a monthly service fee of $25 unless customers make automatic mortgage payments or keep an average balance of $15,000. The equivalent at CitiBank will set customers back a variable monthly fee unless they keep $1,500 in their account.
Advertising ‘no charges for your account’ is, by contrast, not a marketing ploy used by UK banks. Instead British banks must offer serious deals to justify checking fees. The fee-paying account at Nationwide offers a free insurance policy, with 3% on holdings above $2,500. Barclays, while offering free checking as standard with its basic account, offers a ‘premier’ account for £10 ($16) a month with an interest-free overdraft of up to £1,000 ($1,557) and a ‘personal banking manager’ to provide financial management advice at the customer’s beck and call.
Despite international discrepancies between basic account checking – free checking being a right in the UK, and a privilege in the US – high end banking appears to be better value in the States. The American Express Gold Card, free to UK customers in the first year, ordinarily costs £125 ($195) annually with no interest charges or preset spending limit. AmEx charges its US customers around 60% of that with the same free first year deal – $125 annually – for the same account. CitiBank’s Citigold account is £25 ($39) to UK cardholders and $30 for US customers, unless they hold £50,000 ($77,840) for UK customers or $50,000 for Americans.
But big banks in the US are operating on borrowed time with checking fees. Community banks in the States, which hold around 10% of deposits, are petitioning make fee-free accounts a nationwide offering.
65 American banks and credit unions launched a campaign this summer to introduce all-round free checking, with executives signing a ‘Declaration of Free Checking’, timed to coincide with Independence Day celebrations. The petition – written on a scroll to look like the Declaration of Independence – was signed exclusively by local banks, with most participants having just one branch.
Local banks could be behind a change in perception among American card holders towards a more British-style mentality – where free checking is seen as the norm rather than as the novelty.