Citibank is beefing up its checking account offering with free ATM withdrawals and higher yields. It’s battling online-only banks that have been luring consumers with low costs and big perks. Kind of.
Competition is robust, and banks are bringing fees down to attract more customers. But there’s often a catch, as is the case with Citi.
For potential Citi customers, these checking accounts are available only to those who live outside Citi’s 700-strong branch system, which is concentrated in the metropolitan areas of New York, Washington DC, Miami, Chicago, San Francisco and Los Angeles. Citi didn’t clarify how far away from a branch you have to live to get access to this new account.
By offering benefits to those outside its branch catchment area, Citi hopes to compete against the likes of JPMorgan Chase, with its much larger network of more than 5,000 branches. Citibank is also the latest bank to try to win clients with a high yield checking account without ATM fees, similar to Charles Schwab and SoFi, the fintech start up that has backing from Japan’s SoftBank. Online-only banks like SoFi aren’t reliant on branches to begin with, but Citi now has an answer to them as well.
Checking accounts are important business for bank. In the third quarter, Citi’s global consumer banking division contributed nearly half of the company’s revenues, with the North American consumer business contributing more than $5 billion.
Besides free ATM withdrawals across the country, the newly announced Citi Elevate account boasts a high-yield savings rate of up to 1%. That might not seem much, but it is 12 times the national average, Citi noted in a press release.
In comparison, SoFi’s Money account pays 1.6% with no monthly fee. Schwab’s high yield account is also free, but pays only 0.15% in interest.
The new Citi account, on the other hand, will pay the 1% interest only on accounts with balances of $25,000 or more, and the monthly $15 account fee will be waived only for balances above $5,000.
Bank accounts that pay just a little extra have become all the rage in this current low-interest-rate environment. Rates had been on an upward trajectory between 2015 and last year, as the Federal Reserve hiked its benchmark rates. But the central bank has cut rates three times this year already, and interest rates on consumer products have fallen. One area that has benefited from this dynamic are mortgages, which hit multi-year lows earlier this year.
At the same time, fees for other financial products, like brokerage accounts, have come down across the board as companies vie for clients. In October, many brokerage firms slashed the commissions they charge customers to trade to zero.