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Intro: "Even as Bank of America and other major lenders back away from charging customers to use their debit cards, many banks have been quietly imposing other new fees."

Bank of America customers using ATM machines. (photo: Justin Sullivan/Getty Images)
Bank of America customers using ATM machines. (photo: Justin Sullivan/Getty Images)



Banks Quietly Ramping Up Costs to Consumers

By Eric Dash, The New York Times

14 November 11

 

ven as Bank of America and other major lenders back away from charging customers to use their debit cards, many banks have been quietly imposing other new fees.

Need to replace a lost debit card? Bank of America now charges $5 - or $20 for rush delivery.

Deposit money with a mobile phone? At US Bancorp, it is now 50 cents a check.

Want cash wired to your account? Starting in December, that will cost $15 for each incoming domestic payment at TD Bank. Facing a reaction from an angry public and heightened scrutiny from regulators, banks are turning to all sorts of fees that fly under the radar. Everything, it seems, has a price.

"Banks tried the in-your-face fee with debit cards, and consumers said enough," said Alex Matjanec, a co-founder of MyBankTracker.com. "What most people don't realize is that they have been adding new charges or taking fees that have always existed and increased them, or are making them harder to avoid."

Banks can still earn a profit on most checking accounts. But they are under intense pressure to make up an estimated $12 billion a year of income that vanished with the passage of rules curbing lucrative overdraft charges and lowering debit card swipe fees. In addition, with lending at anemic levels and interest rates close to zero, banks are struggling to find attractive places to lend or invest all the deposits they hold. That poses another $8 billion drag.

Put another way, banks would need to recoup, on average, between $15 and $20 a month from each depositor just to earn what they did in the past, according to an analysis of the interest rate and regulatory changes on checking accounts by Oliver Wyman, a financial consulting firm.

For consumers, the result is a quiet creep of new charges and higher fees for everything from cash withdrawals at ATMs to wire payments, paper statements and in some cases, even the overdraft charges that lawmakers hoped to ratchet down. What is more, banks are raising minimum account balances and adding other new requirements so that it is harder for customers to qualify for fee waivers.

Even the much-maligned debit usage charges have effectively been bundled into higher monthly fees on checking accounts. Bank of America abandoned its $5 a month debit card usage fee in late October amid a firestorm of criticism. Yet, it more quietly raised the cost of its basic MyAccess checking account by more than $3 a month earlier this year. Monthly maintenance fees now run $12 a month, up from $8.95.

Chase and Citigroup, which quickly distanced themselves from the debit card usage fee, ratcheted up the price of their entry-level checking products without the public relations nightmare. This month, Citigroup's basic checking account jumped to $10 a month, up from $8. Chase raised the fee on its standard checking account to $12 a month in February; many of those customers were previously charged nothing at all.

Officials at all of those banks are adamant that they have been transparent about the price increases and are providing ample ways for customers to avoid the monthly charges, like maintaining a minimum balance or signing up for direct deposit. Given the uproar, some bankers say the ultimate answer lies in enticing customers to give them more of their business in other services - not by making up the lost revenue on checking accounts.

"The long-term game is improving customer experience scores, so over time you win more business and make more money," said Todd Maclin, the head of Chase's retail and commercial bank.

It costs most banks between $200 and $300 a year to maintain a retail checking account, from staffing branches to covering federal deposit insurance premiums. In the past, the fees banks collected from merchants each time customers swiped their debit card or overdrew their account covered much of that expense. Banks offered "free checking" to the masses as a result.

But the economics have drastically changed over the past two years. Income earned on deposits has fallen, while the revenue gained from fees has plunged by as much as half because of the new regulations. Today, according to Oliver Wyman, banks are expected to take in, on average, between $85 and $115 in fees a year per account - making it especially hard to turn a profit on customers with low balances.

"They have got to make up the income some place," said Vernon Hill II, the founder of Commerce Bank whose retail-oriented approach transformed it into a large regional player before it was sold to TD Bank. He added: "I think we will see a lot more fees."

Some policy makers are already fed up. This month, two Democratic senators, Richard J. Durbin of Illinois and Jack Reed of Rhode Island, urged the Consumer Financial Protection Bureau to adopt a more consumer-friendly disclosure form, akin to the nutrition label on food packaging, for all the fees attached to a checking account.

"Simply put, consumers have had enough of banks that try to sneak fees past them that are hidden in fine print or imposed with no notice at all," they wrote. Last year, a Pew Charitable Trusts study found that bank customers could potentially incur 49 different fees on a typical checking account.

New fees, of course, will cover a small part of the gap in profits. Banks are also hoping that new products catch on. Some are steering lower-income customers to prepaid cards, which were not affected by the reduction in debit card swipe fees.

TD Bank officials say one of their hottest products is a simple checking account with no minimum balance requirement introduced in March. Even though it comes with a $2.99 monthly fee, almost 300,000 customers have signed up. And nearly every major bank has embarked on a cost-cutting campaign, eliminating branches and staff. After a 15-year expansion, the number of branches has fallen almost 1.4 percent to 98,202 from its peak in 2009, according to SNL Financial.

Banks are also lowering the rates they pay savers. The average interest rate for deposits has fallen to 0.74 percent from 0.8 percent during the first six months of this year, according to Market Rates Insight. Most consumers barely notice, but it translates into real money - about $1.5 billion a month in savings industrywide.

Banks may also be betting that consumers will not notice the quiet creep of existing fees. As Richard K. Davis, U.S. Bancorp's chief executive, told investors on a recent conference call: "We'll see if our customers complain and move, or just complain," he said.

Some consumers suspect that banks have deliberately made it difficult to move into cheaper checking accounts.

Ben Ryan, a 33-year-old novelist in Manhattan, said he recently spent 45 minutes on the phone with several Citibank representatives just to switch out of a midtier checking account that would carry a $20-a-month fee and into a more basic one, where he could avoid a charge. Citi officials say they would violate the law if they automatically switched a customer into a different account, and believe requiring a conversation with a representative helps customers better understand their choices.

But Mr. Ryan said the experience left him more confused. "You call, and they don't know what you are talking about. And then there all these different options," he said. "There is no simple way to switch."

 

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+34 # pernsey 2011-11-14 18:49
Everyone get out of the big banks! Quietly open an account in a credit union, and quietly wait for your checks to all clear in your other account, and then switch accounts!!! The banks want their money they can start charging people who can afford it, I cant, thats why I got out years ago. They want to quietly attach fees behind the scenes we can quietly ditch their sorry arses!!!
 
 
+9 # mwd870 2011-11-15 03:44
Great idea!

This quote in the article almost made me laugh:
'"They have got to make up the income some place," said Vernon Hill II.'

How about being happy you still have more money than most of the 99% and looking at shared sacrifice as good for the soul.
 
 
+7 # DanBeach 2011-11-14 21:54
It's Simple: You're Either For the Bank Tax or You're For the Banks
http://www.huffingtonpost.com/rj-eskow/its-simple-youre-either-f_b_1083118.html?ref=politics
 
 
+8 # maddave 2011-11-14 23:32
Banks and bankers charge these burgeoning fees and pay themselves their outrageous bonuses for the same reason that mangey ol' hound dogs lick their balls - because they can.

Bankers believe that they deserve the same profits today that they posted in the go-go subprime mortgage days, but those days are gone - Thank God! - and our dysfunctional Congres and Treasury Department still refuse to bring these greedy dogs to heel . . .

There is no hand on the throttle, but there is hope: OWS shows potential! Let's all support them.
 
 
+3 # epcraig 2011-11-15 02:47
If a credit union does not accept your deposit, do get their recommendation for a local bank. (Some of us lack the credit check to open an account in a credit union). I do like my regional bank, and they cost me much less than my former "too big to fail" bank.
 
 
+2 # boudreaux 2011-11-15 09:30
Quoting epcraig:
If a credit union does not accept your deposit, do get their recommendation for a local bank. (Some of us lack the credit check to open an account in a credit union). I do like my regional bank, and they cost me much less than my former "too big to fail" bank.



I believe that if it is a small bank you you like it then stay with it, as long as you are not being charged for things at your bank then I don't see why not, esp when you can't get into a credit union....but I would call around too to check out other credit unions just in case something happens down the road....hope this helps..
 
 
+3 # NanFan 2011-11-15 03:39
I'm overseas right now and cannot close my big bank, am seeing increased fees in odd areas, sales tax on things that never had sales tax before, and more.

I don't know what to do because my pay is automatically deposited to one account, I have another one that was always free and now has a fee, and my savings account has a monthly fee. I don't need the savings account but I do need the other two.

I'm in a quandry and about ready to transfer as much as I can to PayPal, but that's linked to my big bank account and my debit card.

Any ideas?????????? ???? HELP!!

N.
 
 
0 # boudreaux 2011-11-15 09:31
Is ther no way that you can do this by fax and mail?
 
 
0 # disgusted American 2011-11-15 17:38
Hand in your U.S. passport and stop paying taxes in both countries as well as these fees.

Don't know if you're working over there or decided to live there but I've read that people are facing similar quandries and finally hand in their passports. You can always visit here.

And, if you are in France, you'll have health care when you become a resident.
 
 
+13 # MainStreetMentor 2011-11-15 04:43
This article underscores an earlier post I submitted within another thread: Even after we’ve moved our accounts to a credit union, there is something more the credit unions MUST do: They must establish their own credit/debit card company – for ALL credit unions’ use. Currently every credit union is contractually bound to a Wall Street credit card company. So, even when accounts are moved from a bank to a credit union – a portion of revenue continues to be fed to Wall Street banking/credit firms. That “tie” must be severed if we are to truly have a lasting impact on banking’s revenue stream. In order to establish a credit union credit card company, there will probably have to be special legislation enacted – and that’s where you and I come in – we have to promote and support it.
 
 
+11 # MainStreetMentor 2011-11-15 05:16
Special legislation will be required to allow credit unions to possess and own a credit card company, because whether known or not, the “under-the-tabl e-truth” is: Wall Street financiers, petroleum lobbyists, pharmaceutical companies and the military/indust rial complex lobbyists OWN our Congress, and therefore, our government. They are NOT going to simply allow a competing credit card company to be created – especially one that would most certainly siphon off a portion of their revenue stream. But … obtaining such legislation IS possible, just not “easy”.
 
 
+4 # Granny Weatherwax 2011-11-15 05:35
"Banks can still earn a profit on most checking accounts." - They already do, big time, by extending credit backed by your deposit, and charging interests for it.
 
 
+4 # Granny Weatherwax 2011-11-15 05:37
“We say in our platform that we believe that the right to coin and issue money is a function of Government. We believe it. Those who are opposed to it tell us that the issue of paper money is a function of the bank, and that the Government ought to get out of the banking business. I tell them that the issue of money is a function of Government, and that the banks ought to get out of the Government business... When we have restored the money of the Constitution, all other necessary reforms will be possible, but until this is done, there is no other reform that can be accomplished.”
– William Jennings Bryan
 
 
+5 # Granny Weatherwax 2011-11-15 05:37
“That is simple. In the Colonies we issue our own money. It is called Colonial Scrip. We issue it in proper proportion to make the products pass easily from the producers to the consumers. In this manner, creating ourselves our own paper money, we control its purchasing power, and we have no interest to pay to no one.”
– Benjamin Franklin
 
 
+3 # Nell H 2011-11-15 05:55
My bank sent me a 30-page booklet in small print to explain changes in my account. I did try to read it, but it was difficult to understand what applied to my account and what did not. I have a small bank account in Canada because I visit Canada frequently and having an account saves me money when changing currencies. The Canadian bank lists fees clearly on two side of an 8.5 x 11 inch flyer.
 
 
+2 # boudreaux 2011-11-15 08:46
Quoting Nell H:
My bank sent me a 30-page booklet in small print to explain changes in my account. I did try to read it, but it was difficult to understand what applied to my account and what did not. I have a small bank account in Canada because I visit Canada frequently and having an account saves me money when changing currencies. The Canadian bank lists fees clearly on two side of an 8.5 x 11 inch flyer.


Don't you hate that shit, they don't want you to understand anything that they are doing, that is why it is written like that and it used to be that you could not read the backs of credit cards Terms b/c it was printed in gray ink instead of black...they are ruthless and non-caring of anything but money.
 
 
+4 # LessSaid 2011-11-15 06:51
Okay folks, it isn't a big deal to change your account to a Credit Union. Just open a account at the Credit Union while you still have the account with a bank and then just write a check from your bank checking account to the CU account. The bank account with the bank will be dropped after you just stop using it and all the money is gone.
 
 
+2 # boudreaux 2011-11-15 08:53
Quoting LessSaid:
Okay folks, it isn't a big deal to change your account to a Credit Union. Just open a account at the Credit Union while you still have the account with a bank and then just write a check from your bank checking account to the CU account. The bank account with the bank will be dropped after you just stop using it and all the money is gone.



It's more than that Less, some people have direct deposits like I do and have to go to my the credit union for them to do the paperwork to have it started with them and there is nothing wrong with working with the bank that you are leaving, most of them will work with you too and letting them know that you are closing your acct. hell they aren't mad at you for your decision to move your money...I had to transfer from one bank to another after being with my old one for 15 years and I got nothing but help from them....they are working people just like most of us....and you have to let the other bank know that you are closing your acct or it will remain open...with all of those charges still adding up.....
 
 
+2 # 1984 2011-11-15 12:09
Not always so easy. I know more than one person who did that only to have the big bank continue to charge fees, ask for false overdraft fees, keep harassing the customer and then reporting it to credit companies, which are, by the way, our invisible government over which we have absolutely no control or power.
 
 
+2 # disgusted American 2011-11-15 17:35
Make sure that old bank acc't has been closed b/c in MA there is a $25 for inactive acc'ts - inactive in MA is two years with no activity.

Cover you butt.
 
 
+6 # BradFromSalem 2011-11-15 07:38
Leading up to the banking crash in 2008 the banks took all our money that we kept in checking accounts. This is our money that we gave them to hold for us. We instructed our government to guarantee the funds would be readily available and in return we promised to refrain from demanding all our money back when things at the bank look bad.

In return the banks promise to prudently invest that money while they are holding it for us. In return for the right to invest slightly more of it, they pay us a small interest rate.

Then, in 2008 it turned out that banks reneged on their agreement to invest prudently and they "lost" large portions of our money. As we instructed, the government replenished the bank's reserves so we could still get our money.

Then the banks realized that they still were not making money because all the bad investments went bad. So what did they do? Raise fees on the the people that are using the bank to just hold their money. Instead of losing money the banks could continue making huge profits!

In other words, their capitalistic venture failed and instead of suffering the loss as capitalism demands, the corrupted honest capitalism and shifted the loss to others.

In any other business, this would be illegal. Bankers - Go directly to Jail, Do Not pass GO, do not collect fees.
 
 
+2 # LessSaid 2011-11-15 10:22
boudreaux, I guess we all have different experiences. I did just as I stated and the bank closed my account. In any case, I don't know of any bank that will keep an account open with no money. However, I did have direct deposit. But, all I did was have it changed over to my CU account while I had both of the accounts open.

I am in agreement that you should closed your old bank account after you have made all the necessary changes to establish your new account.
 
 
+3 # Buddha 2011-11-15 13:29
It's been said multiple times: Credit Union. Best way to crush these banks and their influence over public policy...don't put our money in them at all. Of course, that doesn't stop the Fed from giving them free money and them turning around and buying Treasury bonds with that free money, about $16T worth of this free money has come their way so far according to the Fed report Bernie Sandars forced out...
 
 
0 # Doubter 2011-11-15 23:40
Highway robbery!
 

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