Savers won a bank fee battle but are losing the war
Remember Bank of America's failed bid to impose a $5 monthly debit card fee?
The plan launched a public outcry and helped propel a movement -- Bank Transfer Day -- to ditch big banks in favor of smaller institutions.
The fee backlash resulted in a 20% increase in closed accounts at Bank of America during the last three months of 2011.
Overall, more than 2 million people left their big banks, according to DailyFinance.com
It's a victory for the consumer!
The public fuss accomplished nothing and might have helped make bank fees more confusing.
Bank of America and its brethren have backed off debit card fees. Instead, they've raised fees in other spots.
Bank of America, for instance, raised the price of its basic checking account by more than $3 a month, to $12. Citigroup and Chase also put new price tags on their basic checking accounts, with Citigroup customers paying an extra $10 a month and Chase customers, many of whom had paid nothing at all, now charged $12 a month.
And there are also fees that are less visible.
In 2011, the Pew Charitable Trust found that banks have an astonishing array of fees for checking account customers -- as many as 54, in some cases.
They'll charge you money for staff assistance, online transfers, making large coin deposits or converting coins to bills.
Want to replace a lost debit card, deposit money using your mobile phone, wire cash to your account, get a paper statement, pay bills online, receive a canceled check or make an ATM withdrawal out of network? It'll cost you, as will keeping less than a set minimum in your checking or savings account.
And despite new rules around overdraft charges, Americans still paid an estimated $38 billion in overdraft fees in 2011, according to Pew.
Banks offer a confusing array of checking account types, most of which have new, higher minimum balances for customers who want to avoid or minimize fees.
And if you do find free checking, bet that you'll pay higher fees somewhere else to make up for it.
Toting up total fees at Bank A vs. Bank B is time-consuming and complicated, so it's not easy to directly compare deals.
Banks get new fees past consumers in several ways, and they don't publicize the new charges.
True, they are legally required to tell customers account terms, so they do -- in 111 pages, the median size of a checking account term disclosure.
The resulting document is twice the length of Romeo and Juliet and is written in bureaucrat-speak, a "language" that most nonnative speakers find difficult to translate.
Perhaps most importantly, banks hope that customers won't notice creeping fees or at least won't care enough to switch banks. As Richard K. Davis, U.S. Bancorp's chief executive, said on a recent investor conference call, "We'll see if our customers complain and move or just complain."
There's not much you can do about these new charges, but you can work to minimize the dent in your own wallet:
- Spend some quality time with the disclosure document, and know what you're paying. The only thing worse than a fee is a surprise fee.
- Consider maintaining a higher checking account balance in exchange for lower fees. With savings accounts, CDs and bonds paying next to nothing, you won't be missing out on much interest income.
- Cluster your personal, business, investment, checking and savings activity in one place. Banks generally offer lower rates to customers who have more than one type of account or loan with a single institution.
- Check out local credit unions. You almost certainly qualify for credit union membership somewhere. Because they're owned by customers, not public shareholders, credit unions typically charge lower fees than do banks. The tradeoff, however, is that credit unions may also offer fewer services and smaller ATM networks.
- Accept that banks provide services and there is no special reason these services should be free. Decide what the banking services you regularly tap are worth to you, then hunt for a deal that meets or beats that number.