When To Change Banks

"Effective immediately, we will assess a fee of 75 cents per item over 100 items deposited in one month."

Huh?

That was the fine print in a letter our PTO received from our bank. For many years, our PTO had kept its checking account in a local branch of a large bank. We had never paid any fees, with the exception of bounced check penalties, which we attempted to collect from the source. But our bank recently had been sold, and the new owners were updating accounts and fee structures throughout their customer base. We were just one of hundreds of customers whose small-business checking account was modified.

Maybe your PTO is in a similar situation, or maybe you will be soon. I hope our experience can help other PTOs find the best banking solution before the fees bite into your hard-earned money.

A little research turned up the meaning of the fine print in our letter. In banking terms, an "item" is a single check or a set amount of cash, typically $100, or even individual bills. Most months, our PTO deposits only a handful of checks or small amounts of cash. But during our major fundraiser in the fall, we collect more than 350 checks and thousands of dollars in cash. It was easy to figure out that this new fee was going to cost us at least $180. I could not justify working hard to raise money for the school, and then paying some of our profits as fees. It was time to look for a new bank.

I knew I had to work quickly so the account could be relocated before our membership drive and fundraiser started in September. So over the summer I visited six different bank branches in my community. I collected their literature on small business checking accounts and started to compare the details of each offering.

Even if a PTO is not a federally registered nonprofit organization, it is viewed as a small business in the eyes of the bank. To open a bank account, the PTO needs to provide a tax identification number. I found our PTO's tax ID number in the files I inherited as the new treasurer.

Just to be certain of its validity, I called the IRS's nonprofit help line at 1-877-829-5500. The IRS representative told me the number that our PTO has been using for years was actually registered to the school itself, not to the PTO. The next step was to get a tax identification number specifically for our PTO. I printed Form SS-4 from the IRS's website, www.irs.gov, and completed the form as instructed. There is no fee to acquire a tax identification number. With the completed form in hand, I called the IRS help line and within a few minutes, our PTO had its own tax ID number. Step one completed.

Next, I had to compare the details of the accounts. All of the banks had several levels of small business checking accounts, but because we did not need features such as Web banking or an ATM card, I focused on the most basic of accounts. By reading the small print, I learned that nearly all the banks have some kind of "per excess item" fee like our original bank. This was the one fee that would cost our PTO the most, because we have such high transaction volume during our fundraisers.

Comparing six banks, the fee ranged from 20 cents to 75 cents per item. Although our PTO does not handle a lot of coins, a neighboring PTO collects bagel sales money every week. For this parent group, it is important to use a bank that does not charge extra for coin deposits. There are other fees that vary from bank to bank, and I had to consider the impact of each on our particular situation. These fees include: a monthly maintenance charge if you drop below the minimum balance, a fee for depositing a non-sufficient funds check, a fee to have the bank send you back your canceled checks, a fee to stop payment, fees for withdrawing rolled coins, and more.

I decided that we did not really need to receive our canceled checks back every month because in two prior years as treasurer, I had never needed a canceled check. I also determined that our bank balance would virtually never drop below the minimum balance, because our bylaws require that we keep almost that much in our account at all times. So I was not worried about the difference in monthly account maintenance fees.

One bank had an intriguing "Nonprofit Checking" account, but the fees were geared to small organizations with very low transaction volumes. We would have paid through the nose with this account.

I also wanted to find the best deal for check printing, because we would need new checks with the new account. A few of the banks I researched gave a credit toward new checks, ranging from $20 to $50. One of the banks included a pre-inked endorsement stamp with its accounts. As a treasurer, I can appreciate the value of an endorsement stamp when I need to prepare that huge pile of fundraising checks for deposit. If it were not provided by the bank, I would have to spend about $20 to have one made at the local office supply store.

One of the banks told me up front that they did not have a good solution for our PTO. It was easy to cross them off the list. Another bank had what looked like the best deal: a low "excess item fee," $20 credit toward new checks, and even a free duffel bag.

I was ready to make my choice, but I stopped at one more branch. I did not expect this particular bank to meet our needs, because it has a reputation as a "big bank" more focused on big customers. I was pleased to find that this bank is waiving all its regular small business checking fees for one year. Plus, they would give us 200 free checks and an endorsement stamp. For at least one year, our PTO has a new bank. And it isn't going to cost us a thing.

So if your bank starts charging new fees or raises existing ones, do not assume "that's just the way it is." Visit the banks in your community. You might even want to check out credit unions. Banking is as competitive as any consumer industry these days. With a little research and a magnifying glass to read that fine print, you can find a bank that will suit your PTO's needs without charging outrageous fees.

One last thing. I thought I had covered all the bases until I got the monthly statement for our original bank account. In preparation for closing the account, I had left a small balance to cover a few outstanding checks. I then intended to close the account the following month. Ouch! The bank assessed us $10 because the account dropped below the minimum balance. I never even thought of that!

PTO Bank Basics

Choose a bank geared toward the way your group does business. Don't pay extra for features you need, such as a debit card or online banking. Do look for a bank with these features:

• A branch in your immediate community
• The lowest "excess item" transaction fee
• A monthly maintenance fee based on the lowest minimum balance
• Free online banking
• The lowest fee for depositing rolled coins
• A free supply of checks
• A free self-inking check endorsement stamp
• Weekend hours and/or drive-through processing

Originally posted in 2003 and updated regularly.