New York Codes, Rules and Regulations
Title 3 - BANKING
Legal Interpretations
LI 1 - Banks and Trust Companies
Section LI 1.2 - Offer of free personal checking account to persons who maintain minimum savings deposits

A State bank inquired whether the following offer would violate Banking Board General Regulation Part 20, which limits the interest rate which a bank may pay.

The bank would offer a free personal checking account to any person who either purchases a $1000 certificate of deposit or maintains a minimum balance of $1000 in a savings account with the bank. Interest would be paid on the certificates of deposit and on the savings accounts at the highest rate permitted by law.

The department observed that absorption by a bank of all or part of its cost in servicing a checking account of its depositor has not been deemed the payment of interest thereon in violation of the regulation which prohibits the payment of interest on demand deposit accounts.

Applying the foregoing principle, the department concluded that the bank's cost of the free personal checking account would not be regarded as interest within the meaning of Part 20 of the General Regulations and that the offer, therefore, did not violate the regulations.

DATED: March 25, 1970