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Checking accounts: what do banks offer and what do consumers value?


  • Joanna Stavins


Recent evidence shows that the supply of deposits to checking accounts is not elastic with respect to the interest rates paid. That suggests that various features attached to checking accounts may be important in determining the supply of deposits and banks' and revenues from the fees. This study uses a national survey of checking accounts offered by financial institutions in 25 major metropolitan areas in the United States to analyze the effects of restrictions and fees imposed on checking account holders on the supply of deposits and on the banks' check fee revenues. The author places particular emphasis on relatively new restrictions designed to induce customers to adopt cost-saving behavior, such as restrictions on the return of canceled checks and on the use of live tellers. She finds the supply of deposits into checking accounts to be responsive to the bank's per-item fees, check return restrictions, teller restrictions, and foreign ATM fees. Because of this sensitivity of deposit supply, raising most of those fees was found to lower bank revenues from servicing the checking accounts. Only the fee on check return and the NSF fee were found to significantly raise bank revenues.

Suggested Citation

  • Joanna Stavins, 1999. "Checking accounts: what do banks offer and what do consumers value?," New England Economic Review, Federal Reserve Bank of Boston, issue Mar, pages 3-14.
  • Handle: RePEc:fip:fedbne:y:1999:i:mar:p:3-14

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    References listed on IDEAS

    1. Garth Saloner & Andrea Shepard, 1995. "Adoption of Technologies with Network Effects: An Empirical Examination of the Adoption of Teller Machines," RAND Journal of Economics, The RAND Corporation, vol. 26(3), pages 479-501, Autumn.
    2. Amel, Dean F. & Hannan, Timothy H., 1999. "Establishing banking market definitions through estimation of residual deposit supply equations," Journal of Banking & Finance, Elsevier, vol. 23(11), pages 1667-1690, November.
    3. Joanna Stavins, 1997. "A comparison of social costs and benefits of paper check presentment and ECP with truncation," New England Economic Review, Federal Reserve Bank of Boston, issue Jul, pages 27-44.
    4. Arthur B. Kennickell & Martha Starr-McCluer & Annika E. Sunden, 1997. "Family finances in the U.S.: recent evidence from the Survey of Consumer Finances," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Jan, pages 1-24.
    5. David B. Humphrey, 1994. "Delivering deposit services: ATMs versus branches," Economic Quarterly, Federal Reserve Bank of Richmond, issue Spr, pages 59-81.
    6. James J. McAndrews, 1991. "The evolution of shared ATM networks," Business Review, Federal Reserve Bank of Philadelphia, issue May, pages 3-16.
    7. Kenneth C. Carraro & Daniel L. Thornton, 1986. "The cost of checkable deposits in the United States," Review, Federal Reserve Bank of St. Louis, issue Apr, pages 19-27.
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    Cited by:

    1. Brian Mantel, 2000. "Why do consumers pay bills electronically? an empirical analysis," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q IV, pages 32-48.
    2. Christopher R. Knittel & Victor Stango, 2003. "Compatibility and pricing with indirect network effects: evidence from ATMs," Working Paper Series WP-03-33, Federal Reserve Bank of Chicago.
    3. Knittel Christopher R. & Stango Victor, 2008. "Incompatibility, Product Attributes and Consumer Welfare: Evidence from ATMs," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 8(1), pages 1-42, January.
    4. Brian Mantel, 2000. "Why don't consumers use electronic banking products? towards a theory of obstacles, incentives, and opportunities," Occasional Paper; Emerging Payments EPS-2000-1, Federal Reserve Bank of Chicago.
    5. Cara S. Lown & Stavros Peristiani & Kenneth J. Robinson, 1999. "What was behind the M2 breakdown?," Staff Reports 83, Federal Reserve Bank of New York.

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    Checking accounts ; Checks ; Consumer behavior;


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