Ever use a talking ATM and get stuck with surcharges because your bank
doesn't have talking ATM's?  If you have a brokerage account, consider
the services offered there.  As the article below describes, many will
reimburse customers for the ATM fees they encounter.  This can offer the
best of both worlds:  the ability to stay with your bank if they don't
yet have talking ATM's and the ability to have no-fee ATM withdrawals.

Kelly



The Wall Street Journal
July 10, 2002


Do You Really Need a Bank?
Brokerages Don't Think So

By CALMETTA COLEMAN and MICHELLE HIGGINS
Staff Reporters of THE WALL  STREET JOURNAL

In an effort to corral more assets, brokerage firms from Merrill Lynch to
Morgan Stanley are setting themselves up as direct competitors to
consumer banks. Among the offerings: free checking, higher interest rates
and other perks designed to lure away affluent customers.

The firms' efforts are aimed squarely at the $738 billion that consumer
banks have under deposit. The goal is to persuade customers who already
have their investment accounts with the brokerage firms to drop their
local bank and move all their assets, including basic checking accounts,
under one roof.

While major brokerage firms have long offered basic checking service,
they are stepping up efforts to remove some of the obstacles that have
prevented people from switiching their accounts in the past.

In May, American Express rolled out its "One" account that offers, among
other things, an ATM card and price guarantees on home mortgages. Several
firms, including Fidelity and E*Trade, will now reimburse ATM fees
imposed by other institutions. Charles Schwab filed for a bank charter in
May, which will enable it to offer loans and government-insured checking
and savings accounts.

So far, about 1% of households with incomes of $100,000 or more have
their main checking account with a brokerage firm, according to a study
by Synergistics Research Corp., a financial-research firm. The same study
found that 36% of this income group would consider opening a checking
account with a brokerage firm. In recent months, banks are firing back
with their own beefed-up offerings.

What You Get

Here is a sample of some of the banking services offered by brokerage
firms:

. Free checking

. Reimbursement of ATM fees

. Home-equity loans

. Debit cards that earn "rewards" points

What You Don't

A few brokerages lack these banking features:

. FDIC insurance

. ATMs

. Branches

It is part of a blurring of the lines between banks and brokerage firms
that picked up steam after 1999, when deregulation allowed both
industries to offer a complete menu of financial products. Now, virtually
all brokerage firms offer banking services; most even own banks that
offer FDIC-insured accounts.

Brokerage firms don't want just anyone to bank there. They mostly want
upper-income customers who park large amounts of cash in their bank
accounts. Many firms require a minimum balance of $5,000 just to open an
account, and some require additional minimums of $20,000 to $100,000 in
stock portfolios and other assets.

For many, the brokerage accounts have distinct advantages over banks.
Banking through a brokerage firm allows customers to easily switch money
back and forth between brokerage accounts and checking, savings or
money-market funds. Come tax time, all your securities information is
consolidated in one place.

With the market so volatile, some customers welcome the additional
handholding that comes with the brokerage accounts. Bryan Seder, a
Philadelphia physical therapist, says on the recommendation of his
American Express adviser he recently took out a line of credit to pay off
his student loans, which will allow him to take a tax deduction at the
end of the year. And now, with all his accounts in one place, Mr. Seder
says he spends far fewer "late nights on the computer" working to get his
finances in order.

Under assault from the brokerage firms, banks are working to hang onto
their customers. In May, National City, a big Midwestern bank, introduced
its Money Management Checking account that includes free checks and pays
3% interest -- most comparable bank accounts pay only 1% or so today. The
bank offers account holders membership in a travel club that provides
discounts on trips ranging from casino outings to tours of Switzerland.
The minimum balance is $5,000, and customers also get free checks and a
discount on a safe-deposit box.

Banks, of course, are pursuing customer's assets just as aggressively as
brokerage firms. U.S. Bank hopes to sell people annuities, long-term-care
insurance and brokerage services. "Our objective is to make ourselves the
core financial institution," says Steven SaLoutos, a U.S. Bancorp
executive.

U.S. Bank also has a new account that combines checking with brokerage
services and allows transfers between the two. That account is directly
geared to people who might turn to brokerage firms.

There are disadvantages to banking with your broker -- like fewer
branches. Fidelity, for example, has just 85 branches spread throughout
29 states and the District of Columbia. And while customers can make
deposits there, they can't cash checks. By contrast, Commerce Bank has
nearly 200 full service branches in New York, New Jersey, Pennsylvania
and Delaware.

For many, the big draw is having all their assets under one roof. That is
certainly the case with Ken and Sandra Taylor, a retired couple in Ponte
Vedra Beach, Fla. When they go out to eat, they use their Merrill credit
card. They pay their bills with Merrill checks. They are even getting a
mortgage from Merrill. "It makes it easier for us to manage everything,"
says Mrs. Taylor.

Banking With Your Broker

Brokerage firms are increasingly offering banking services, allowing
customers to keep all their money in one place. Here are some of the
services -- and fees -- you can expect with banking and cash-management
accounts at various brokers:

Table with 4 columns and 8 rows

BROKERAGE FIRMS
MINIMUM BALANCE TO OPEN
ONLINE BILL PAY
ATM ACCESS

American Express
$5,000
Free
7,400 ATMs. Will reimburse up to $6 per
month in non- American Express ATM surcharges for accounts with assets of
$25,000 or more.

Charles Schwab*
$5,000 in account, plus $100,000 in other assets.
Free  with $500,000 in assets or $6.95 per month.
No ATMs but will reimburse  all non-Charles Schwab ATM surcharges. .

E*Trade
$100
Free with minimum balance of $2,000 or $6.95 per month.
11,000 ATMs. Unlimited ATM fee reimbursement with minimum balance of
$5,000.

Fidelity*
$2,500
Free with $100,000 in assets or $6.95 per month.
No  ATMs. Will reimburse up to five transactions per month; $1 fee
thereafter.

Merrill Lynch
$20,000 in
Free with "Unlimited Advantage" account or $7.50  a month.
No ATMs. No fee for first 52 assets. You can transactions; $1
thereafter. open an Internet- No fee for first 100 only account with
transactions for accounts over $2,000 in cash. $250,000.

Morgan Stanley
$5,000
$6.50 per month for the first 25 transactions; 25
cents thereafter.
No ATMs. No fee for first 100 transactions; $1
thereafter.

UBS Paine-Webber*
None
Free
No ATMs. No fees. No reimbursement. table end

Write to Calmetta Coleman at
[log in to unmask]
and Michelle
Higgins at
[log in to unmask]

Updated July 10, 2002


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