Posted on 11/14/2011 4:00:12 AM PST by Cardhu
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.
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 U.S. 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.
(Excerpt) Read more at nytimes.com ...
At such low interest rates it is cheaper for people to keep their money under their mattresses.
According to the article, the average interest rate is .074% and the average yearly fee is $100. This means on a balance of $10,000 you will make $74 in interest but pay $100 in fees and end up losing $26.
So you save $26 a year keeping the money under your mattress rather than investing it in a bank.
I got a solicitation from my C.U. to change my checking account to an interest bearing one. The deal was that I’d be required to keep a minimum balance of $2500 in it, I do that anyway but I didn’t want to be required to do it.
Nowhere in the letter they sent me did they mention just what amount of interest they would pay. Since I already know that they pay 0.17% on savings accounts, I’m guessing that checking would pay that amount or less. I won’t even bother to change my account for that paltry amount. The checks I use are already free.
It's for checks - a mobile phone app. You take a picture of the front and back of the check and transmit the image to your bank. Done. You never send in the physical check.
Nice article, but misses the point. Banks don’t like charging individual customers direct maintenance fees because it gets peoples’ undies in a twist, like this guy. However, the supreme law of economics is TINSTAAFL - there is no such thing as a free lunch - and banks are as much subject to it as anyone else. Banks are not charities and must earn at least the costs of the services they provide through some means, and since the oh-so-concerned liberals in government are constantly, and futilely, trying to create what cannot exist - Nature abhors a free lunch almost as much as it abhors a vacuum - the need to cover your costs has to be satisfied one way or another, and charging individual customers maintenance fees for their accounts is the latest cranny from which this irrepressible urge has now popped.
Name names. Here, I'll help. Dodd and his queer buddy Frank.
I find the small local banks to be a lot easier to work with. The regionals are next.
The large national or global banks are just plain evil.
In more than 40 years of doing business with my Credit Union I don't remember ever paying any fees. I used to have to pay a small amount for new checks but they don't even charge for that anymore.
I agree with you EBH. I live in Spain and keep an account in a small bank in Kansas - it only has two branches but it is the most efficient bank I have every done business with.
It seems that the larger banks just want to nickle and dime their customers to death.
believe it or not. You take a photo of the check with your smart phone and they process it.
Community banks played an important role in small towns. Intermediary services without international hedge fund risk. The “little guy” is now expected to make up bank losses on bad bond purchases.
bfl
We were raised with the idea that if we put our money in the bank, we would gain interest because they were using our money to make money via loans. All the “no interest accounts” should have no “fees”.
True, but many banks seem to have changed their business model quite a bit over the years. Back in the early 1980s, banks were able to attain profitable operations while paying deposit accounts interest rates around 4% and loaning unsecured money at around 12% to 18%, with minimal fees. Now, banks are paying depositors less than 1% and loaning unsecured money at 16% to 29% and claiming they can't make money without a lot of fees - even though they are processing more transactions electronically which reduces their costs. So for some reason, even though the spread that the banks have to work with has doubled, banks today say they are short on revenue.
Maybe their real problem is bad investments, or excessive overhead, or excessive compensation of their employees and executives. Or some other structural problem like excessive government intervention in the financial markets. Or all of the above.
Generally you can Move only to your ledger entries
Electrons merely exist momenterily as entries are
Made
The customers of mc global had their entries comingled
Secondly, banks are also facing a combination of low interest rates and a housing market in the dumps, which means they can't generate much mortgage revenue and don't have as many mortgage origination fees as they used to.
Exactly. Get used to more fees, and higher fees . . . because these banks are in business.
Name names. Here, I'll help. Dodd and his queer buddy Frank.
And don't forget Sen. Dick Durbin and Elizabeth Warren who was pushing for Consumer Financial Protection Bureau and is running for Senate seat in MA.
This is exactly what happens when government (liberals) want to make banks into a government-regulated "utility" instead of free market, competing on price and quality of services. Sad to see so many on FR joining the Democrats and "occupiers" in blaming "big banks" and the financial services industry when the problem is and has been all along with the government regulation...
FTA: Banks Are Quietly Ramping Up Costs to Consumers - CNBC / NYT, 2011 November 14
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. ..... < snip > < snip > ..... 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.
For those who think the "answer" is "friendly" non-profit (i.e., tax-free) credit unions, part of the reason is that CUs are tax-advantaged compared with small or big banks. But with larger deposit base, CUs will need to increase revenues, too... so expect similar gimmicks from them, without as many services or broad areas of coverage that many people need.
From Credit Unions Poach Clients - WSJ, by Suzanne Kapner, 2011 November 7
Banks try to recoup such costs by imposing overdraft fees and other charges. But new rules in the wake of the financial crisis limit some of those surcharges. The recent debit-card-charge mess was a failed attempt to close the gap. Many banks also have done away with free checking accounts, unless customers maintain a minimum balance and meet other criteria. But with the average checking account containing $5,200, according to research firm Raddon Financial Group in Lombard, Ill., many customers can't avoid the monthly charges. ..... < snip > ..... < snip > David Small, a spokesman for the National Credit Union Administration, a federal regulator and insurer of credit-union deposits, said many of the nation's 7,200 credit unions "are in rural areas where there is no other banking option." Some bankers complain that credit unions have outgrown their status as a lender of last resort to poor and rural communities and should be forced to pay taxes just like for-profit banks. "At a time when state and local governments are struggling with lower revenue, why should some of these credit unions be subsidized if they are not going to provide those services?" said David Locke, chief executive of McFarland State Bank in McFarland, Wis. The bank has about $500 million in assets but is having trouble competing with nearby credit unions, he added. Credit unions are lobbying Congress to let them make more business loans. The current limit is 12.5% of assets. Raising the cap would allow credit unions to diversify their loan portfolios and provide more capital to cash-strapped companies, Mr. Small said. Yet several large commercial credit unions, which invest money on behalf of their retail members, went bust after loading up on high-risk mortgages during the housing bubble. ..... < snip > < snip > ..... Moebs Services Inc., a research firm in Lake Bluff, Ill., estimates it costs the giant banks about $350 to $450 a year to maintain a checking account. In contrast, smaller banks incur costs of $175 to $250 a year per checking account.
As usual, with government, be careful what you ask for, you just might get it. Anyone wants more "consumer protection" or "consumer-friendly" regulation from the likes of Dodd, Frank, Durbin and Warren?
Great post, it really underscores how the media controls public perception.
They are trying to make up for the losses from those regs.
“Banks Quietly Ramping Up Costs to Consumers,”
False:
Banks Attempting to charge those LOANING THEM money.
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