Banking used to be simple. Bankers lived by the 3-6-3 rule — borrow at 3 percent, loan at 6 percent, and hit the golf course by 3 in the afternoon.
People put their money in neighborhood banks to let it accrue interest and keep it safe. Banks pooled those funds and made loans to worthy borrowers. The spread between monies borrowed and monies loaned was the bank’s profit.
But the banking industry has gotten a lot more complex and sophisticated, and the number of services that banks now provide has increased exponentially. Savings and checking accounts, mortgages, personal loans, car and student loans, credit card accounts and lines of credit have all become more complicated and pervasive, and the average consumer today has many more accounts spread across many more institutions.
Increasing Bank Fees and Penalties
Because banking is a business that exists to make money, modern banks have added more costs, fees and penalties to their customers’ accounts. Here are 10 new views banks are taking:
1. Want to talk to someone? What’s it worth to you?
Some banks are limiting customers’ access to live staff. Bank of America’s e-banking account holders are charged $8.95 a month for the opportunity to make a transaction via a human being. At PNC Bank, calling a customer representative costs between $2 and $3. Capital One doesn’t bother with a fee at all – or humans, for that matter. If an online banking customer comes into a branch for help, he or she is connected to the bank’s online support system — by phone.)
2. You bad little kitten! Did you lose a mitten — or something?
Losing a debit or credit card is annoying enough. Now cardholders are going to pay for their mistakes. A replacement debit card at Bank of America costs $5. Need it right away? $20 for rush delivery. TD bank charges $25 for expedited service. Chase Bank charges $5 for a replacement debit card; PNC, $7.50. Who knew plastic was so expensive?
3. Hey, paper’s not cheap!
A paper statement (for you old-fashioned savers) at TD Bank costs a buck a month. U.S. Bank charges up to $2 per month for paper statements on some checking accounts. Wells Fargo charges $2 for images of canceled checks with its paper statements.
4. You moved and didn’t tell us?
Your bank wants your new address. If your statement from U.S. Bank is returned as undeliverable, it will charge you a $5 fee for the second and subsequent months. First Bank & Trust, Bank of Arkansas and Bank of Oklahoma charge undeliverable mail fees of $15. The cost can reach $5 at BankAtlantic.
5. Excuse me, but we’re not a library.
Bank of America charges $3 for extra copies of checks, statements or deposits. British-owned HSBC (the Hongkong and Shanghai Banking Corporation) charges $5 for a photocopy of a check or statement. Credit card customers at TD Bank pay $7 for copies. Bank of America will also charge a research fee of $20 per hour if a customer needs to dig into his or her account history or dispute a transaction. Chase charges $25 an hour for research and $6 for copies.
6. We will get you coming and going.
Outgoing wire transfers have always cost something, but now that’s the case with incoming, as well. Both Chase Bank and PNC charge $15 for funds received over the wire.
7. We like to call it maintenance.
Most banks have raised the minimum account balances needed to waive various “maintenance” fees. Bank of America charges a monthly fee on a regular savings account unless the customer sets up an automatic funds transfer of $25 or more from a linked checking account or maintains a minimum daily balance during each statement cycle. Fifth Third Bank will waive its monthly service fee, but only if the customer has more than one checking account. Citibank requires at least five transactions per month on a basic checking account to avoid the fee.
8. Free checking? Not so much.
Believe it or not, there used to be a time when not only was a checking account free, it actually paid you interest! More than 60 percent of banks offered free checking in 2010; one year later, less than 40 percent did. Interest became history years ago.
9. Our rewards program has a point.
American Express is charging a fraction of a cent for each point redeemed for domestic air travel through its reward program. Well Fargo charges $24 for each airline ticket issued through its reward vendor.
10. We hate to see you go.
PNC Bank and U.S. Bank charge $25 for closing an account within six months of opening it. Chase Bank charges the same $25 for closing an account within 90 days.
Read the Fine Print
Banks have managed to accumulate billions of dollars — by controlling the system and, some would say, confounding their customers with pages of jargon and small print. This finally came to the attention of the U.S. government in the wake of the recent financial meltdown and recession. Congress passed the Credit Card Act of 2009, which limited banks’ ability to charge specific fees and penalties. The new regulations are estimated to cost banks $38 billion by 2013.
Even outside of Washington, consumers can make their voices heard.
In 2011, several banks were considering adding a $5 monthly fee to every account with a debit card. Thousands of outraged customers complained and many fled to local banks and credit unions, and the $5 fees dissolved amid the negative backlash.
What savvy consumers need to know is that many fees can be avoided by banking online, maintaining minimum balances or agreeing to certain requirements. To understand all of the charges, consumers should read the fine print on a bank’s website or printed material before opening an account.
Bill “No Pay” Fay has lived a meager financial existence his entire life. He started writing/bragging about it in 2012, helping birth Debt.org into existence as the site’s original “Frugal Man.” Prior to that, he spent more than 30 years covering the high finance world of college and professional sports for major publications, including the Associated Press, New York Times and Sports Illustrated. His interest in sports has waned some, but he is as passionate as ever about not reaching for his wallet. Bill can be reached at [email protected].