A bank in Austin, Texas is introducing a new type of checking account. Designed primarily for two types of clients, Probity Checking is a $19.95, all-inclusive checking account with up to $500.00 in overdraft protection. There are a number of unique features of Probity Checking that make it desirable for certain types of consumers.
Consumers are tired of being nickeled and dimed to death by their bank in various fees. The highest and most annoying fees are overdraft fees. Probity Checking is designed for consumers who don’t deliberately write hot checks, but occasionally find that they have not paid as much attention to their checking account balance as they should and occasionally have had overdrafts or, worse, NSF checks. Overdrafts are when the bank pays a check for which there is no money available in the account but charges you a fee, typically $25 – $35 per overdraft. NSF checks are ones that are not paid and are sent back to the party who took the check from you. Banks typically charge the same amount for both NSF checks and overdraft checks. The two largest consumer banks in the country charge $35. for each overdraft item, whether it is a $3.00 cup of coffee or a big screen TV. When understanding overdrafts, it is also important to know how banks prioritize the checks they are going to pay first. Check clearing occurs on a one time per day basis and banks have their systems set up to pay the largest items first, leaving the smallest items unpaid (or paid by overdraft) after the available balances of the account have been exhausted. Since smaller check amounts are more common, the bank gets to charge overdraft fees on more items, thus generating more revenues.
Tim Smith, CEO of Probity Financial Services stated, “Our market research indicated there would be significant demand and we are experiencing enormous growth every week.” Clearly this is a unique checking account product that can serve a certain segment of the market. Smith said he knew of no other similar checking account available in the U.S.
A 2008 FDIC study of bank overdraft fees showed that overdraft fees are a very large source of income for banks and they are all too glad to cover the check of an established customer and charge the $25 – $35 fee. The FDIC study indicated that 13% of consumer accounts pay 93% of all overdraft fees. The demographics of this group indicate that they have every expectation to live within their means but may be on fixed income (social security or disability) or are often part of the X generation, who are starting young families and struggling to make their paychecks go as far as they would like. Consumers in these primary two groups might greatly benefit from Probity Checking because being charged even twice for overdraft checks would be substantially higher than the monthly flat fee.
Probity Checking offers consumers all of the same features as premium checking accounts at the major banks but with one exception. There is only one monthly flat fee of $19.95. Among its features are: