University Daily Kansan
Wednesday, February 26, 1975
3
Free checking approved
From page one.
Brown also said that Traders National Bank attracted large amounts of business capital, which it was able to invest, and that the bank's investment covered the cost of free checking services.
Both Baltimore and Commerce Banks denied that interest charged to customers on loans was raised to cover the costs of free checking.
Sith said, "Loans really have no bearing on it. The interest we can charge on consumer installment loans is governed by the federal rate and we pay about a percent over the minimum federal rate."
LOAN RATES ARE DECIDED according the merits of each individual applicant's creditworthiness.
Baltimore also raised its charge on all overdrafts, from $3 to $16, she said.
With the move to free checking,
Baltimore Bank raised the price of money orders and cash's checks to 50 cents each, Sith said, and started charging $2 for stop payment orders on checks to cover free checking costs.
Weaver said that Commerce Bank had raised the cost for processing an overdrawn check from $4 to $10 but said that the invoice was processed before the bank switched to free checking.
"I don't know whether the money we'll lose will be made up." Weaver said. "We hope the result will be an increased dollar deposit."
ACCORDING TO FEDERAL REGULATION, banks can use up to approximately 85 per cent of their checking deposits for investments and loans to earn income. The exact percentage varies with the total assets of the bank.
He also said the interest rate charged on
the service been increased to make up lost
service charge.
Weaver said Commerce Bank did invest
part of its checking deposits but said this
was too difficult to state a specific
percentage.
Lee Buck, cashier at Baltimore bank, said his bank used 65 to 70 per cent of its checking deposits for loans and investments.
Buck acknowledgment that using such a large percentage of funds from fluctuating checking deposits was risky. He said the bank tried to guard against a shortage of cash, but although not requiring, new checking customers to make an initial deposit of $100.
Weaver, the marketing executive at Commerce Bank, said banks with free checking weren't more susceptible to "runs" because people kept the same amount of money in their checking accounts whether they were free or not.
Jon Ford, assistant controller at Commerce Bank, said that even if a "run" should occur when a large portion of the checking deposits were on loan or tied up in investments, Commerce's secondary reserves would cover any forseeable withholding. The bank would be able to get these reserves converted into cash within a day, he said.
Buck said Baltimore Bank hired several new workers to handle the increased flow of checks and the increased number of savings accounts due to the bank after free checking started.
WEAVER SAID THE number of checking accounts at Commerce Bank had increased since it adopted free checking, but he declined to say how much. He said that there also had been an increase in savings deposits, but that it wasn't directly correlated with the increase in checking accounts.
He said bank officials hadn't determined whether people were writing more checks
Ford said a study by Commerce Bank of the effect of the new checking policy on its business seemed to indicate that people weren't writing more checks just because the checks were free. That is contrary to what most bankers expected, he said.
Weaver said he thought free checking would become more common and that this trend will be boosted if the federal agency provides loan institutions to start checking services.
"Our volume has gone up simply because of the increased number of checking accounts, but we haven't had time to analyze whether the number of checks per account has gone up. We're snowed under with checks. I can tell you." Buck said.
Sixth predicted that all banks eventually would go to free checking because of
Of all the suburban banks in greater Kansas City not associated with the larger downtown banks, only Southgate State Bank and Trust Co. offers free checking.
However, Brown said smaller banks could "now follow to big banks in off-the-shelf free cash" (a free check).
ALTHOUGH THE BANK is located in suburban Johnson County, it concentrates heavily on business accounts and thus is able to compete with the downtown banks, Bryce Anderson, executive vice president of Southgate Bank, said.
But Mrs. Fern Conley, vice president in charge of cashmills at Rayton Bank, disagrees with both the economics and philosophy of free checking.
keep alive. Checking is an expensive service. We feel it's no more than right that a fair charge should be put on these services" she said.
"Our feelings are that a bank is no different than any other business. We have to
Conley said although the advantage of larger capital assets for the downtown banks isn't unfair, it was the reason those banks would afford to give away checking services.
Wichita bankers are menusubstitute about the trend to free checking, however, but most believe that it is inevitable, according to the bank as cashier at First National Bank in Wichita.
SOUTHGATE BANK appears to be the first city bank in Kansas to offer free checking. No banks in Wichita or Topena personal checking for the average customer.
"We don't like it and we don't agree with it." Long said, "but we would go to it if we hadn't."
Thursday: Local bankers discuss why free checking hasn't come to Lawrence.
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