WASHINGTON - When banks branch across state lines, customers start paying more for products and services, according to a study released Tuesday by the Federal Reserve.

The Fed's annual survey of bank fees found that customers at out-of- state banks paid about $2 more for stop-payment orders, bounced checks, and overdrafts in 1994 than those using in-state banks.

Customers who use banks based outside their state also needed to keep up to $170 more in their account in order to avoid further fees.

However, the survey also concluded that fees charged on average did not increase significantly last year.

In sharp contrast to a study released last month by a consumer group, the Fed found that most bank fees either rose less than 1% or declined.

The Fed delivers this report, "Retail Fees and Services of Depository Institutions," to Congress every year. However, the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 required the central bank to expand its annual survey by analyzing fees by bank location, size, and whether the institution is involved in interstate banking.

The differences in fees charged by out-of-state and in-state banks are linked to the size and location of the institutions, the Fed said. According to the report, out-of-state banks tend to be bigger than in-state banks and are more concentrated in large urban areas, where costs are often higher.

If bank size and region are accounted for, the amount of the difference shrinks but doesn't disappear.

Virginia Stafford, spokeswoman for the American Bankers Association, said the report didn't pay enough attention to factors like cost of living in a big city.

"I think these results have more to do with urban vs. non-urban areas than anything," Ms. Stafford said. "The fact is that banking services and anything else will cost more. The cost of living is different in Washington, D.C., than in Staunton, Va. It just is."

Still, Janice Shields, a researcher with the Center for the Study of Responsive Law, said the Federal Reserve's findings show that people who want to avoid high fees should seek out alternatives to big banks.

"But with the merger mania that's been happening recently, that's becoming less and less possible," she added.

Ms. Shields also noted that many banks have raised the minimum balance needed to avoid fees for various services, forcing more people to pay fees than before.

The report surveyed about 650 banks and 400 savings institutions.

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