I have recently noticed that many persons are using their savings accounts for chequing purposes. After calling three of the prominent banks and inquiring about their fees, I understood why this is common practice. Below are the monthly fees associated with savings and chequing accounts at these institutions.

Scotiabank Jamaica

No monthly fee for savings account

Monthly fee ($300) for chequing account (regardless of balance)

National Commercial Bank

Monthly fee ($100) for savings account if balance falls below $2,000;

Monthly fee ($510) for chequing account if balance falls below $20,000.

First Caribbean International Bank

Monthly fee ($150) for savings account if balance falls below $3,500;

Monthly fee ($350) for chequing account if balance falls below $70,000.

Chequing accounts are generally used by customers to pay for goods and services throughout any given month. For this reason, the principal balance in chequing accounts fluctuate, vigorously throughout the course of a month. It becomes difficult to forecast chequing account balances beyond the short term. This is in contrast to savings accounts which are intended for holding liquid cash for longer periods.

The concept behind a savings account is that the bank invests the principal in consumer loans to households, and commercial loans to businesses. A portion of the return earned from these loans is then passed on to the savings customer in the form of interest. However, when money is invested, it becomes inaccessible and can't be called upon for a period of time.

For this reason, it is imperative that the amount being leveraged remain consistent and relatively stable. Since savings accounts are intended to hold stable balances for longer periods (than chequing), they are more suitable for investment.

Restrictions

The higher fees and restrictions associated with chequing accounts dissuade customers from opening and using chequing accounts for their intended purposes. Customers are now armed with ABM cards that they can use to pay for goods and services from their savings accounts, just as with chequing accounts. In addition, interest is earned on the remaining balance in the savings account.

If people are using their savings accounts for chequing purposes, it means that the balances will be just as volatile. The question I then have is, how can the banks effectively forecast savings account balances? If effective forecasting is not possible, then it also diminishes the ability of the bank to invest in consumer loans to households, and commercial loans to businesses.

I urge the banks to return to fundamental principles by removing the monthly fee associated with chequing accounts. This would encourage customers to use chequing accounts as they were intended and foster a proper savings culture. Such a move would be beneficial not only to the customers, but also to the productive sector, and the banks as well.

I am, etc.,

STEPHEN EDWARDS

patriot.ja@gmail.com

Kingston 6