All Articles Tagged "bank fees"
Nickel and Dimed: Checking Account Fees Siphon Money From Your Account
Image: Photodisc
Data analysis by financial publisher Bankrate.com finds that just 39 percent of “non-interest checking accounts” are free, a decline from 45 percent last year and 76 percent the year before. So not only are there fees, but the increase in the number of accounts that have them has been sharp.
The AP reports: “Among other fees, the average monthly service fee on checking accounts is a record $5.48, up 25 percent from the Bankrate survey a year ago. Also, the average fee charged by an ATM operator to a non-customer rose 4 percent to a record $2.50, Bankrate said.”
Banks say they’re charging the fees because of government regulations that could cost them “billions.” In other words, they’re passing the cost along to customers.
Well, customers are not having it. Nearly three-quarters of people say they would change banks if any additional fees were tacked on to their account. And they’re not lying either. About a year ago, Bank of America tried to charge $5 per month for debit card purchases. But after a customer revolt, they decided not to. Wanting to avoid the PR disaster, other banks who had planned additional charges followed in BofA’s footsteps.
Interestingly, Bankrate.com found that houses making more than $75,000 per year were the ones most likely to switch banks if new fees were proposed. Which just shows why people with money have it; they look after every dollar. If your bank adds a charge for using another bank’s ATM, try not to do that. In some cases, you’re paying a fee for using an ATM at a bank that’s not yours, and then your bank will add another fee. One transaction can cost as much as $5. Do that twice in a week, and that’s the cost of lunch. It sounds silly, but walk an extra block at lunch to save on that fee. It’s good exercise.
Even with the fees, it’s important that households have, at the very least, a checking account at a reputable bank. You’ll recall our story from just a couple of weeks ago, saying that more than a fifth of black families don’t have a bank account. Instead they’re using cash and alternative financial services, like payday loans, to take care of bills and expenses. These alternatives have fees that far outweigh those that the banks are charging. If you have to pay, better to pay the lower price.
Bank of America CEO Tries To Explain Why The New $5 Fee Is Best For Its Shareholders…And Customers
by Cynthia Wright
In a bold move, Brian Moynihan, the CEO of Bank of America, defended his bank’s right to impose a $5 fee on debit cards. In order to take much of the heat off himself and those in partnership with the company, he then said that customers and shareholders understood their recent moneymaking strategy because the bank has a “right to make a profit.”
During his press conference on Wednesday, Moynihan stopped short of blaming Obama who has come out against the greed that banks have been showing by stating that no bank has a right to a certain amount of profit.
“Well, you can stop [the fee] if you say to the banks, ‘you don’t have some inherent right just to, you know, get a certain amount of profit if your customers are being mistreated,’” Obama told ABC.
Of course, Moynihan is on the other side of the spectrum. During an interview with CNBC’s Larry Kudlow, he again stated that as a CEO, he has the duty to make sure all his shareholders are compensated.
Leading those to wonder, is he more preoccupied with fattening the wallets of his shareholders, instead of focusing his interest on the millions who deposit their monthly earnings into his banks around the world? It is not surprising that protests have sparked up around the country stemming form NYC”s Occupy Wall Street that began over two weeks ago.
In a vain attempt to justify the debit fee, Moynihan further explained that the bank was transparent in letting the customers know what they were doing and by giving them a chance to opt out before the new fee goes into effect in 2012.
Due to the changing landscape of Wall Street reforms, such as the Dodd-Frank Act, he was left with no other way to turn a profit as a public institution. At the same time, he tried to make it clear that he didn’t feel the bank was under attack. ”We have the best bank in the world, we do a great job for our customers,” he told Kudlow. Bank of America isn’t the only one imposing new fees on their bank customers; Citibank has also announced a fee accrual plan for checking accounts.
Cynthia Wright is an avid lover of all things geeky. When she isn’t freelancing, she can be found on her blog BGA Life and on Twitter at @cynisright.
Fees Push Consumers to Credit Unions
(Daily Finance) — Last Friday, after Bank of America’s (BAC)announcement of new fees on debit cards, retired postal worker Victoria Lee took her adult daughters to her local USPS Credit Union. “[My daughters opened] free checking accounts with no charges for the use of debit cards,” Lee said. Like many Americans who are carefully watching every dollar, the Florida resident said she was grateful to have an alternative to retail Wall Street banks. Meanwhile, a record-breaking 3,200 new checking accounts were opened over the weekend at the Navy Federal Credit Union, the world’s largest credit union with 3.7 million members and nearly $48 billion in assets. The weekend surge — which crushed the previous high of 2,500 — fits into a larger trend for the credit union, which serves the Department of Defense and active duty military. It has had annual growth between 6.3% and 6.7% since 2007, and is on track to record a 14% uptick in membership this year, said Tisa Head, the senior vice president of savings products. In addition to its fee-free debit cards and accounts, another driver for the year’s projected double-digit membership increase has been the credit union’s willingness to post pay early for active duty members who use the Active Duty Checking account.
How to Break Up With Your Bank
(Daily Finance) — 1. Find the right bank or credit union for you.The financial institution that works best for your brother may not be the best one for you, so do your own research. It comes down to a matrix of three things for each customer, says Barrington: services, fees and locations. Ask yourself: How do I use my bank? Do I use a debit card and ATMs? Do I prefer mobile banking and online transactions, or do I prefer paper checks and statements? Is international access important to me? If you’re moving a checking and savings account together, compare the interest rate earned on the savings account with the service charges on the checking account.
Paying to Use Your Debit Card?
(Daily Finance) — Bank of America will start charging debit-card users $5 a month to pay for purchases. The move comes as the cards increasingly replace cash and as banks look for ways to offset the loss of revenue from a new rule that will limit how much they can collect from merchants. Paying to use a debit card was unheard of before this year and is still a novel concept for many consumers. But several banks have recently introduced or started testing debit card fees. That’s in addition to the spate of other unwelcome changes checking account customers have seen in the past year. Bank of America will begin charging the fee early next year. Bank of America’s announcement carries added weight because it is the largest U.S. bank by deposits.
Overwhelmed and Racking up Overdraft Fees
(Daily Finance Wire) — Overdraft fees are like a movie monster that just won’t die. No amount of public outrage or regulation can slay the beast. But the banks aren’t the only ones casting overdrafts in financial sequels: Truth is, consumers who don’t properly manage their accounts, or who have money problems, keep breathing life into the overdraft dragon. ”Overdrafts are part of the small advance and loan market,” explains G. Michael Moebs, CEO of Moebs Services. Other parts of that “market” include credit card cash advances, transfers from deposit accounts or small lines of credit, payday loans, pawn loans, even gifts and loans from family and friends — and at the extreme, loan sharks. “The surprise is, no matter how much government tries to regulate and legislate away this small loan market, it keeps coming back,” says Moebs. “People want and need a funding safety net.”
What New Debit Card Rules Mean for You
(Daily Finance) — Banks received some long-awaited news last week: theFederal Reserve voted to cap feescharged to retailers on debit card transactions at roughly 24 cents per transaction, down from an average of 44 cents. Financial institutions had feared the Fed’s initial proposal of a 12 cent cap would go through, which would have been a buzz cut — a 73% revenue loss in what trade groups estimate amounts to a $20.5 billion a year income stream for banks. The Fed also delayed implementation of the new rule until October, yet another sign of the long, heavily lobbied debate.
Fed Limits Debit Card Fees
(New York Times) — Fees paid by retailers to banks for debit card purchases, a $20 billion annual expense that has been the subject of a furious political battle over the last year, will be cut in half after the Federal Reserve voted Wednesday to cap the charges. The cap was mandated last year in the Dodd-Frank financial regulation law, but the Fed action was far less draconian than bankers had feared. The new cap of 21 to 24 cents a transaction, down from an average of 44 cents before the law passed, is roughly double the 12 cents tentatively proposed by the Fed last December. Consumers are unlikely to see any immediate change at the register because they do not pay the fees directly. But merchants have complained that as the cost of debit fees — a charge for processing payments — has risen in recent years, they have had to add it to the prices they charge.
Bank Fees for Child Support and Unemployment Payments?
(Wall Street Journal) — Instead of paper checks, Oregon officials pay weekly unemployment benefits by loading the money onto debit cards that come with several unusual fees. After she found a job last year, 48-year-old Jennifer Schmidt of Riddle, Ore., was charged an “inactivity fee” of $2 by U.S. Bancorp for not using her debit card once she stopped drawing unemployment. The $2 fee sank the balance on her card into the red, triggering an overdraft fee of $17. ”How is it possible that the bigwigs in government can’t get a better deal for us?” she says. More than 40 U.S. states use prepaid debit cards to funnel unemployment benefits, child-support payments and other funds to recipients. Getting rid of paper checks and postage is hard to resist for cash-strapped governments, which last year steered $53.2 billion in unemployment benefits and child-support payments to prepaid debit cards, up 33% from 2009, according to Mercator Advisory Group Inc., a research firm in Maynard, Mass. Such cards made up 32% of the overall prepaid debit-card market in 2010. Banks are barreling into the business, led by J.P. Morgan Chase & Co., the second-biggest U.S. bank in assets, which has contracts with 21 states. U.S. Bancorp, based in Minneapolis, has contracts with 16 U.S. states. The nation’s largest bank by assets, Bank of America Corp., has deals in five states and will start issuing debit cards for California’s unemployment benefits in July.
Can’t Figure Out Your Bank’s Fees? Not Alone
(Smart Money) — Bank fees have been steadily creeping up, but getting branches to disclose these fees as required by law remains a frustrating uphill battle for customers. A survey of bank fees involving 392 bank branches has just been published, and the results are not pretty. Only 38% of bank branches complied easily with simple requests for fee schedules under the 20-year-old Truth In Savings Act, which requires disclosure of a schedule of account fees to prospective customers so they can compare them with other banks. The U.S. Public Interest Research Group’s 21-state report, Big Banks, Bigger Fees 2011, set out to discover how easy (or not) it was for consumers to shop around and whether bank branches comply with the Truth In Savings Act. The researchers discovered that “only after two or more requests” did 55% of branches provide fee schedules as requested and as required by the Act.
