Credit & Debt

What to Expect From Your Bank This Year

One industry expert predicts more fees and fewer rewards.

There's a good chance you'll find yourself asking this year, "What has my bank done for me lately?" That's because banks likely will reduce or eliminate rewards programs, increase fees and continue to offer meager interest rates on savings accounts, says Ken Tumin, who reviews bank and credit union deals for DepositAccounts.com (which tracks details for thousands of accounts).

Here are Tumin's predictions for 2011:

1. You won't earn much interest on your money. Tumin says savings account rates and short-term CD rates will likely stay low in 2011 as the Federal Reserve continues its monetary policy while it waits for improvements in the economy. (This echoes Kiplinger's interest-rate outlook). This will force short-term interest rates to remain very low.

2. You'll have a harder time finding free checking. Free checking had been subsidized by overdraft fees, which have been banned on ATM withdrawals and debit transactions unless account holders sign up for overdraft protection. To compensate for the loss of that fee revenue, some banks have added more fees to accounts -- and more banks are expected to do so this year. Customers may still be able to avoid monthly fees, but the new bank conditions will require larger balances or specificactivities such as direct deposit, Tumin says. See Free Checking Is Tougher to Find.

3. Your debit-card rewards might disappear. This spring, the Federal Reserve is expected to issue new rules on the fees merchants pay when their customers use debit cards, called debit card interchange fees. Currently, many banks offer programs that encourage debit-card use by giving perks to account holders who use them. If the Fed limits the debit card interchange fee, large banks will reduce or eliminate programs that reward debit-card use. (However, stores might start offering discounts for using debit cards.)

4. Your high-yield reward checking account might become less rewarding. Over the past two years, hundreds of community banks and credit unions launched reward checking accounts with higher rates than internet savings accounts. The high rates were possible thanks to debit-card interchange fees. But banks and credit unions may reduce or discontinue reward checking accounts when the Fed issues new rules on these fees.

5. Your bank is more likely to let you deposit checks remotely (if it isn't already). More banks will allow customers to deposit checks from their smart phones or by using home computers and scanners. And expect banks to improve the technology for making these transactions more secure (see Biometric ID: The Next Step in Bank Security).

6. Your bank's chances of failing will decline slightly. Bank failures peaked at 157 in 2010, Tumin says, but the number of failures dropped in the last quarter of 2010. The FDIC predicts fewer bank closures in 2011. (Kiplinger's predicts that about 100 banks will fail.)

7. If your bank does fail, your savings rate could take a hit. For the most part, your money will be safe if your bank is FDIC-insured when it fails (take our quiz to learn more about your protections). However, you may lose high interest rates on your CDs because acquiring banks are allowed to reduce rates on existing CDs. Many banks did that in 2010, and many will likely continue this in 2011.

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