BANKING COSTS

CINDY ELLEN RUSSELL / CRUSSELL@STARBULLETIN.COM Customers Lysina Akamu and Jay Kuni make a purchase at Rocky Mountain Chocolate Factory in Aloha Tower Marketplace.

Sum of all fees

Not shopping around can cost isle
banking customers a pretty penny

Small businesses look for loyalty,
customer service and charges

---

By Dave Segal
dsegal@starbulletin.com

Communications consultant Scott Foster of Waialua knows his checking account is being bludgeoned every month by service charges but feels at his bank's mercy because of erratic customer payments to his small business.

State geologist Jeff Ung of Maunalani Heights, on the other hand, diligently balances his checkbook every month and scrutinizes his statement to make sure he isn't paying any fees.

Hawaii banking customers who don't keep such close tabs on their accounts may not realize how much they are losing in fees to their local financial institutions.

A November 2001 survey by the U.S. Public Interest Research Group in Washington, D.C., found bank customers who couldn't meet balance minimums required to avoid fees paid an average of $228 a year to maintain a regular checking account. The survey, while noting that not all customers pay these fees, includes industry averages for canceled check returns and ATM card use as well as an allowance for one bounced check and one deposit item returned per year. Credit union customers, meanwhile, paid an average of $101 using the same criteria.

The group based its survey, which doesn't include Hawaii, on 521 banks in 32 states and the District of Columbia and on 144 credit unions. The study points out how important it is for consumers to shop around when deciding where to park their money.

"Consumers have different banking needs," said Greg McBride, a financial analyst at North Palm Beach, Fla.-based Bankrate.com. "If you're looking to minimize the fees that you pay, look at your checking account and see what the true cost of this account is -- what you pay in monthly service fees, any per-check charges you have and what balances you are required to maintain in order to either avoid fees or earn interest.

Sorting them out Bank: Focuses on commercial and retail type of businesses as well as going after individual accounts. Credit union: A nonprofit organization that exists for the benefit of its membership and is tax-exempt. Predominantly deals with consumer accounts rather than commercial accounts. Savings and loan: Originally created to take deposits and residential loans but has diversified into other services. Also known as a thrift.

"The good news is alternatives do exist, and that may not necessarily be switching institutions. It just may be a matter of switching accounts. Banks typically offer a range of accounts. So it might be a matter of finding an account that is better suited to your banking needs."

Or, McBride added, consumers might consider joining credit unions, whose nonprofit, member-oriented status give them some advantages over banks.

"Credit unions, much like small local community banks, are a great alternative for consumers," he said. "They typically pay higher rates on deposits and offer lower rates on loan products."

Competition for customers is intense in Hawaii, with seven banks, two thrifts, one major financial services loan company and 101 credit unions competing for business.

Bank of Hawaii, Central Pacific Bank, City Bank, First Hawaiian Bank and Hawaii National Bank are all based in Hawaii. Bank of the Orient, which bought the deposits of ailing Bank of Honolulu in October 2000, is based in San Francisco and HomeStreet Bank, formerly known as Continental Savings Bank, is headquartered in Seattle. American Savings Bank, a subsidiary of Hawaiian Electric Industries Inc., and Territorial Savings & Loan Association are the two thrifts. Finance Factors Ltd., the state's biggest financial services loan company, is not permitted to offer transaction accounts like checking but does offer savings accounts and loans.

"Consumers must evaluate the service or product they receive and the price they pay for it," said Dave Thomas, vice chairman of retail banking for Bank of Hawaii, which offers the most branches (76) and ATMs (489) in the state. "Some people choose to shop at Neiman Marcus and some people choose to shop at Costco, and each individual makes a decision of what represents the right value for them."

All the Hawaii financial institutions, with the exception of Finance Factors, offer some form of free checking, with many of them giving breaks to students and seniors. That leaves customer service and convenience, fees and the ability to get loans as the wild cards for potential customers.

"Our niche tends to be older customers and customers who want a real person to speak with as opposed to the other financials that have high-tech services," said Denise Takashima, Territorial's senior vice president of development/marketing. "That's why we have things like free checks. Also, the telephone number for customer service has no voice-mail service. We have real switchboard operators. Ours is more people- and customer-service driven as opposed to automatic and 24 hours, seven days of the week."

Ung, the geologist, who is married with a 1-year-old daughter, said he moved his money from American Savings Bank to HawaiiUSA Federal Credit Union about five years ago after twice getting assessed a maintenance fee when his interest-bearing checking account balance fell below the minimum level for one or two days in two different months.

"I tried to get my money back and they did do it one of the times but it was a hassle," Ung said. "So I said, 'OK, I'm moving my money.' "

In Foster's case, he suffered both financial and personal setbacks when his wife died and he was laid off from his state job.

"That messed up my credit pretty good despite the fact that I've been with Bank of Hawaii for 20 years and paid all my notes as agreed," he said. "I can't borrow any money from them.

"I had a $5,000 loan I was paying off when my wife died and I did manage to continue making good on it, but I had to get in a fight with them to just pay the interest (for) a few months. Now that the note is nearly retired, I went back to renew it to buy computer equipment and was told no.''

Foster, who also is executive director of Advocates for Consumer Rights, said he is concerned that banking has become more impersonal as it has integrated more electronic services.

"The high returned-check charges affect only primarily the poor who don't have a voice," Foster said. "I have online banking and I'm very diligent in watching my checking account balance. But because I'm an entrepreneur and my money comes in erratically, if I'm expecting a check and it doesn't come in, I may be a few hundred dollars overdrawn. I just have my lunch eaten with these bank fees. The well-to-do people with means don't even see these huge service and check-return charges. This month my fees will be about $100, mostly from returned-check fees."

A Star-Bulletin survey taken last month showed that the average bounced-check fee at Hawaii's seven banks and two thrifts averages $16.75, with HomeStreet Bank the highest at $20 and Territorial Savings & Loan and Bank of the Orient the lowest at $15. That's far below the nationwide average of $25.21 as calculated by Bankrate.com, which surveyed 350 banks outside of Hawaii. By comparison, the same Star-Bulletin survey showed that the average bounced-check fee at the seven Hawaii credit unions with more than 20,000 members was $15.43. Six of the seven credit unions charged $15 with only HawaiiUSA Credit Union, the state's largest, assessing $18.

Other banking comparisons also showed Hawaii with lower fees than on the mainland.

Nationwide, the average monthly service charge for noninterest checking accounts was $6.11 and for interest-bearing checking accounts was $10.67, according to Bankrate.com.

The Star-Bulletin survey, which only studied "regular" accounts, found that the monthly service charge for noninterest checking accounts ranged from zero to $9 for noninterest checking accounts and from $6 to $11 for interest-bearing accounts. In the case of some checking accounts, some banks offer discounts of $1 each off the monthly service charge if payroll direct deposit and check safekeeping options are chosen.

"A good bank will sit down with the customer and ask how the customer will bank," said Thomas of Bank of Hawaii. "Will they use direct deposit? Will they use an ATM? It's up to us to understand a customer's needs and match the best account possible with their needs because we know our products. Our customers don't know our products."

Ed Mierzwinski, a consumer advocate with U.S. PIRG and the primary author of the organization's study, said banks are continually finding new ways to charge fees.

"It's called a la carte pricing," he said. "They are unbundling services the same way the telephone companies did."

Some banks even charge customers a fee, depending on the account, for speaking to a human teller.

But Thomas disputes the notion that banks are solely interested in raising fees.

"In the last two years, we have not increased fees at all," he said. "We have decreased minimum balance requirements and changed or lowered some of our fee structures during that period."

And Rodney Shinkawa, executive vice president of the Hawaii Bankers Association, an industry lobbying group, said fee revenues cover real expenses.

"A lot of those fees are based not on the competition but what it costs to provide that particular service," Shinkawa said. "It costs a lot of money to handle a bounced check, and I don't think they're just charging fees without any basis for them."

Still, a survey from R.K. Hammer Investment Bankers in Thousand Oaks, Calif., showed that 50 percent of total income from banks in 2001 came from fee income, up from 35 percent in 1995. The survey, however, included fees from all types of banking products and services, not just from deposit accounts.

Mike Schenk, vice president of economics and statistics for the Credit Union National Association, said credit unions, as well as banks, have benefited in the past two years by customers flocking to conservative investments due to the uncertainty in the economy and a dismal stock market.

"When we compare credit unions and banks, on average credit unions are more attractive than banks for several reasons," Schenk said. "First, they tend to have fewer fees. Second, to the extent they have the same types of fees, the actual fees tend to be lower. And third, the rates they pay their members tend to be higher than banks offer for comparable accounts."

Added U.S. PIRG's Mierzwinski: "We found that credit unions are your best deal, and if you don't qualify, small community banks are your next best deal."

Nevertheless, big banks also have their advantages.

"Many consumers value the breadth of services that larger institutions offer," said McBride of Bankrate.com. "This includes a large branch network, a widespread ATM network and a range of personal and business services. Also, not everyone is eligible for membership in a credit union."

In Hawaii, though, everyone is eligible to join a credit union because on each of the islands there are community credit unions that serve people who live, work, attend school or worship in a defined geographical community. On Oahu, those eligibility requirements fit the Hawaiian Tel Employees Federal Credit Union, which has 33,000 members.

Credit unions, often criticized for their relatively few branches and limited free ATM availability, have taken steps to address those deficiencies with the Hawaii Network of shared-branch locations. In Hawaii, 31 such locations, which are identified on the Web site www. hicuso.com, enable credit union members to perform their financial transactions at another credit union branch that is part of the network. Most credit unions also have partnerships with Hawaii banks, mostly Bank of Hawaii, that allow customers free transactions, up to a limited amount, at bank ATMs.

Still, Dennis Tanimoto, president of the Hawaii Credit Union League, offers a reminder that banks and credit unions are not created equal.

"The important thing to remember is, that in case of banks, they service businesses as well as individuals," Tanimoto said. "They get commercial accounts in addition to consumer accounts. Credit unions are predominantly consumer accounts."

Bank of Hawaii, whose ATMs are made available to credit union members through leases or other arrangements, has alliances with approximately 90 of the 101 credit unions.

"We feel very much like we're a partner," said Thomas of Bank of Hawaii. "Many services that they don't have the talent or sophistication to provide on their own we will provide to them, which enhances their product offering, such as access to our ATMs.

"Our relationship with credit unions is also complex in that some customers may choose to bank at a credit union rather than a bank. So, in that regard, they're also our competitors."

Charges at banks and thrifts

Fees for various accounts at Hawaii institutions, ranked by number of branches in the state

Institution	Hawaii branches	Free ATMs	Unaffiliated ATM withdrawal fee Unaffiliated ATM	inquiry fee	Stop check fee	NSF fee	Overdraft fee	Overdraft protection	Regular noninterest checking minimum daily balance	Noninterest checking monthly fee if falls below minimum	Regular interest checking minimum daily balance	Interest checking monthly fee if falls below minimum	Regular savings minimum daily balance	Savings monthly fee if falls below minimum	Free checking
Bank of Hawaii (888) 643-3888 www.boh.com	76	489	$1	50&CENT	$20	$17	$22	$15/year	$500 (1)	$9 (2)	$1,000 (3)	$11 (2)	$300	$4	Yes
American Savings Bank 627-6900 www.asbhawaii.com	71	168	$1	50&CENT	$18	$18	$21	$15/year	$500	$7 (2)	$1,000 (3)	$10 (2)	$300	$4	Yes
First Hawaiian Bank 844-4444 www.fhb.com	56	174	$1	50&CENT	$18	$16.75	$20.50	$15/year	$500	$7 (2)	$1,000 (3)	$9.75 (2)	$250	$4	Yes
Central Pacific Bank 544-0500 www.cpbi.com	24	77	$1	50&CENT	$16	$18	$18	None	$500	$7 (2)	$750	$9 (2)	$200	$3	Yes
City Bank 535-2500 www.citybankhawaii.com	21	22	$1	50&CENT	$15	$16	$20	$20/year	None	None	$1,000	$10	$100	$3	Yes
Territorial Savings & Loan 946-1400 www.territorialsavings.net	17	16	$1	50&CENT	$10	$15	$18 after 1st yr.	$10/year	None	None	$100 (4)	$6	$100	$3	Yes
Hawaii National Bank 528-7711 www.hawaiinational.com	14	12	$1	50&CENT	$16	$15	$16	None	$400	$6 (2)	$1,000	$8 (2)	$100	$3	Yes
Finance Factors Ltd. (5) 522-2000 www.financefactors.com	11	0	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA	$100	$2	No
Bank of the Orient (800) 881-2686 www.bankorient.com	2	2	$1	$1	$10	$15	$15	None	None	None	$500 (4)	$7	$500	$3	Yes
Home Street Bank 537-9404 www.homestreetbank.com	2	2	$1.50	$1	$5	$20	$24	$25/year	None	None	$500	$6	$200	$1	Yes

(1) Or $1,000 average balance for the month; (2) Service fees can be reduced $1 or $2 by direct deposit, check safekeeping, or both; (3) Or $3,000 average balance for the month; (4) Average balance for the month; no minimum balance if age 55 or older or with direct deposit; (5) Classified as a financial services loan company, not a bank or thrift. Definitions: NSF fee - Nonsufficient funds fee for writing a bounced check; Overdraft fee - Check written against insufficient funds but covered by institution; Regular accounts - An average type of account; Overdraft protection - Cost to establish a line of credit, which requires application process and activates interest fee when tapped; not the same as overdraft fee linked to savings account

Charges at credit unions

Fees for various accounts at Hawaii credit unions with more than 20,000 members

Institution	Members	Eligibility	Hawaii branches	Free ATMs	Affiliated bank for ATM use	Unaffiliated ATM withdrawal fee	Unaffiliated ATM inquiry fee	Stop check fee	NSF fee	Overdraft fee	Overdraft protection	Regular noninterest checking minimum daily balance	Noninterest checking monthly fee if falls below minimum	Regular interest checking minimum daily balance	Interest checking monthly fee if falls below minimum	Regular savings minimum daily balance	Savings monthly fee if falls below minimum	Free checking
HawaiiUSA Federal Credit Union 534-4300 www.hawaiiusafcu.com	72,000		9	489	Bank of Hawaii (1)	$1 (10)	$1	$10	$18	$18	None	None	None	$1,000	$10	$5	None	Yes
Hawaii State Federal Credit Union 587-2700 www.hsfcu.com (10)	52,000		5	489	Bank of Hawaii (2)	None	None	$10	$15	$15	None	NA	NA	None	None	$100	$1	Yes
Hawaiian Tel Employees Federal Credit Union 832-8700 www.htefcu.org (10)	33,000		4	2	Bank of Hawaii (3)	50&CENT	50&CENT	$10	$15	None	None	None	None	$400 (4)	$5	$100	$1	Yes
Hickam Federal Credit Union 423-1391 www.hickamfcu.org	33,000		3	9	None	None	None	$7	$15	$15	None	NA	NA	None	None	$100	None	Yes
Pearl Harbor Federal Credit Union 423-1331 www.phfcu.com (10)	24,000		4	489	Bank of Hawaii (5)	None	50&CENT	$10	$15	$15	None	None	None	NA	NA	$5	None	Yes
University of Hawaii Federal Credit Union 983-5500 www.uhfcu.com (10)	21,600		2	200		None	NA	$10	$15	$15	None	NA	NA	$5	None	$100	None	Yes
Honolulu City and County Employees Federal Credit Union (10) 531-3711 www.kalanet.com	21,098		1	19 (7)	KalaBash (1), (6)	None (10)	None	$10	$15	$15	None	None	None	$300	None	$100	None (8)	Yes

(1) Unlimited free transactions; (2) Limited to 20 free transactions per month; $1 fee per transaction thereafter; (3) 50 cents per transaction except for ATM in front of credit union; (4) No minimum balance requirement with direct deposit; (5) Limited to 5 free transactions per month; $1 fee per transaction thereafter; (6) KalaBash ATM machines owned by the Honolulu City and County Employees Federal Credit Union; (7) Eleven are KalaBash machines; the rest are with PRIZM network; (8) No interest earned on accounts with balances below $300; (9) Limited to 10 free transactions per month; $1 fee per transaction thereafter; (10) Member of shared-branch Hawaii Network; Definitions: NSF fee - Nonsufficient funds fee for writing a bounced check; Overdraft fee - Check written against insufficient funds but covered by institution; Regular accounts - An average type of account; Overdraft protection - Cost to establish a line of credit, which requires application process and activates interest fee when tapped; not the same as overdraft fee linked to savings account

BACK TO TOP

---

|

Small businesses look for loyalty,
customer service and charges

---

By Dave Segal
dsegal@starbulletin.com

Hosoi Garden Mortuary Inc. has been in business for a century and its partnership that may never die is the one it has with Central Pacific Bank.

The Honolulu funeral home, which principally serves people of Japanese ancestry, and the bank, which was founded initially to serve Hawaii's Japanese-American community following World War II, share a common bond that has served the mortuary's banking needs over the years.

For others, such as the owners of Wiki-Wiki Drive Inn and Loco Moco Drive Inn, banking choices are dictated by the convenience of being able to walk next door or across the street to get change or make a night deposit. Ditto for Rocky Mountain Chocolate Factory, whose owners have the same needs but travel just a little farther to reach their bank.

Gift & Gourmet's sole proprietor, seeking better fees and improved customer service, recently switched banks to fulfill her needs.

And the owner of Aloha Homes said the relationship he's developed with his bank has been instrumental in building his business.

Loyalty, convenience, customer service and fees. Those are some of the things small businesses look for when selecting a financial institution.

Hosoi Garden Mortuary, whose relationship with Central Pacific Bank dates nearly to the bank's inception in 1954, spreads its business over three banks. Besides using Central Pacific for business checking and sweep accounts, it uses Bank of Hawaii for retirement funds and First Hawaiian for investment accounts.

"We've been with Central Pacific Bank almost from the very beginning," said Clifford Hosoi, president, chief executive and funeral director for the mortuary that his grandfather started around the turn of the last century. "We have a very good association with the bank and had a good relationship with the former bank management at the King Street branch. They used to do a lot of personal services for us the old-fashioned way by coming in and checking with us.

"Now there's no branch manager relationship. Services are being handled by specialists. If you need a loan, talk to this person. If you need to open another account, talk to this person. If you need trusting, talk to this person. This is instead of branch management acting as a liaison for what we need. I'm not complaining about not having service. It's just that the banking business is changing. I don't know if it's working out for the better, but so far, so good."

Hosoi Garden Mortuary, a public company with between 25 and 27 employees, approximately 1,200 shareholders and $2.7 million in annual gross revenues, said loyalty also plays a role in the company's relationship with Central Pacific Bank.

"Old-time relationships don't necessarily translate into present-day advantages, so the fees and everything they do for you is very important," Hosoi said. "But we're a very loyal company and we try to honor the institution that helped us in the past with loans. So we felt that sometimes we're in debt to a big institution that has helped us."

Access to cash

Cathy Clark, who with husband Greg co-owns Rocky Mountain Chocolate Factory in Waikele and Aloha Tower Marketplace, said convenience and getting change for the store are two of the main reasons why they chose Bank of Hawaii to do their business.

"We primarily use the Waikele branch of Bank of Hawaii," Cathy Clark said. "It's maybe a quarter mile from the store. They also have a night depository.

"Business loans are also a factor for us because we've used Bank of Hawaii for business loans for store expansion."

Rocky Mountain Chocolate, which has eight employees for the two stores, opened in Waikele 812 years ago and added the Aloha Tower store six years ago.

Clark said the fees they're assessed now are better than they used to be.

"I'm fine with the fees we're being charged now," she said. "It's been averaging about $10 a month. In the past, they were doing something called account analysis, where you were being charged for every deposit processed, every check processed and every check written. They were analyzed and broken down and the total cost was significantly more than we're paying now. But that was over two years ago."

Eric Wong, who with Wilson Lau co-owns the Wiki-Wiki eateries on Bishop Street and in Restaurant Row, as well as Loco Moco in the Ewa Beach Shopping Center, said their banks were chosen due to the proximity to their businesses. City Bank is across the street from the main Wiki-Wiki eatery on Bishop and Hotel streets while First Hawaiian Bank is less than five feet away from their Loco Moco in Ewa Beach. Wong said the three eateries, which have a combined 27 to 28 employees, generate about $300,000 to $500,000 in revenues per year.

"Because we literally have to make change every day, the closest bank made sense to us," Wong said. "We have more of a liquid account. We normally make a deposit once every other day and pay our bills almost every day.

"We're a small business and primarily a cash business. We need to be able to break $100 bills and have the necessary change available. The fees were comparable to any other places. It's a fast-moving checking account, with about $1,000 to $2,000 going in and out every day."

Wong said Wiki-Wiki initially started banking with International Savings & Loan and became a City Bank customer when the bank merged its two subsidiaries in July 2000.

"We're pretty simple," Wong said. "We're not asking for loans. They've even called us when we were overdrawn and we made up the difference. They've been very good with us."

Unlike Wiki-Wiki, Loco Moco primarily caters to families and the dinner crowd. When the store closes at 9 p.m., making a night drop at the nearest First Hawaiian location is literally steps away.

"We don't want our people running around with $200 in cash and traveling too far to make a deposit," Wong said.

Service matters

Celia Khim, the sole operator of Gift & Gourmet on King Street near Alakea, said she recently switched from City Bank to First Hawaiian for a couple reasons -- City Bank raised her monthly fees and she was dissatisfied with the bank's customer service.

"The thing that kicked me over to another bank was that the bank limited corporate accounts to 20 transactions a month for free, and if you have more than 20 transactions, you're charged about 20 cents a transaction. Or you can get an account for $14 a month. You also had to pay an extra fee for a copy of check transactions," said Khim, whose store sells specialty coffee and other food and gift items and generates less than $300,000 in revenues per year.

"First Hawaiian has unlimited transactions, no monthly fee and gives you checks back for free. Everything at First Hawaiian was 'Yes, I can do that.' It was so easy. Brenda Mocaer, the customer service rep, was very accommodating."

Khim said she still has a small business account with City Bank and does electronic banking there due to loyalty.

"I try to do the politically correct thing. I'm sympathetic to people who have been wronged in the past," said Khim, who noted that City Bank and Central Pacific Bank were formed after other banks refused to loan money to Japanese and Chinese.

Yet, for her business account, Khim said she had to look elsewhere after about 12 incidents with City Bank that she said included problems with night drops, acquiring balances, automatic payments and charge cards.

"I base my business on customer service and bend over backward to be nice to customers," Khim said. "So when I do business with someone who is unaccommodating and not customer-friendly or consumer-oriented, it really behooves me to go elsewhere."

Building relationships

Sole proprietor Ira Gordon, who sells commercial and residential real estate and serves as a real estate consultant, said the relationship that he's developed with the McCully branch of American Savings Bank has facilitated his business. He also said he appreciates the early evening and in-store weekend banking hours that are available at some of the branches.

"I have a good relationship with the branch and the branch managers, and when I go in there the tellers and the managers are very friendly and helpful for whatever I need," said Gordon, whose Kalakaua Avenue-based business generates less than $500,000 annually in revenues. "They also have a good line of credit for small business that works very well. Clearing checks, checking on deposits, a variety of things you have questions on -- I can go in there or call and have them check on things. I used them for wires when I had an Italian handbag store in Waikiki (that's now closed) and my partner was in Italy.

"One thing I'd say, in general, is that it's good to establish a relationship with a bank and the people there because when you need things done or questions taken care of, you can get it done and get in and out quickly," Gordon said.