Earlier this month, city of Ashland officials authorized taking $21,000 out of a contingency fund to pay higher-than-expected fees to cover banking service charges and credit and debit card costs.

Residents aren't the only ones facing higher banking and credit card costs in the wake of the financial industry's troubles.

Earlier this month, city of Ashland officials authorized taking $21,000 out of a contingency fund to pay higher-than-expected fees to cover banking service charges and credit and debit card costs.

City Recorder and Treasurer Barbara Christensen said the city government uses Bank of America.

While an average consumer may be able to find a bank that offers free checking, the city government has to pay banking fees to cover more advanced services such as direct deposit of employees' payroll checks, she said.

In the past, the city earned enough interest to offset those fees. But interest rates are down, leading the city to spend an additional $1,025 per month, Christensen said.

Britney Sheehan, a Seattle-based media relations manager for Bank of America, said the Federal Deposit Insurance Corp. is charging banks higher fees.

She said she could not go into details about a customer's interest earnings.

Christensen said more residents are using credit and debit cards to pay their utility bills. The city absorbs an average 3.5 percent charge when a person uses a card, she said.

"The law doesn't allow us to pass the fee from a credit card onto a customer," she said. "Over the past year, the use of credit and debit cards has increased. It's affected the budget."

Christensen said the city is at the end of a five-year contract with Bank of America that included an initial three-year contract plus two one-year extensions.

A request for proposals from banks interested in having the city government as a customer is going out this week or next, she said.

In the past, Christensen said the terms with Bank of America were advantageous and saved the city a lot of money. "The banking environment has changed so much. Banks have more expenses that they are passing on to customers," she said.

She said any bank interested in submitting a proposal must have a branch in Ashland because the city makes daily deposits.

Frustrated by what they view as risky financial behavior by some national banks, some Americans have joined a movement to pull their money from big banks and open accounts with locally owned banks.

Christensen said the city of Ashland can't show favoritism to a locally owned bank when it decides where to do its banking.

"We can't eliminate national banks," she said. "We have to be responsible to the people who pay taxes and be as good with their money as we can. ... I have to go with the bank that can provide the services at the best price."

Staff writer Vickie Aldous can be reached at 541-479-8199 or vlaldous@yahoo.com.