Since full disclosure and honesty backfired for multinational banks in October, numerous news sources are reporting that banks plan to revert back to their “sneaky” ways of sticking fees to customers.
Banks claim that they were rooked out of $12 billion a year due to financial reform legislation passed down through the Durbin amendment portion of Dodd-Frank. Last month when Bank of America announced its now infamous debit card fee, CEO Brian Moynihan said that his bank “has every right to make a profit.” Bank of America has since recanted the fee.
Frank Keating, President of the American Bankers Association said last month that consumers should blame the government, not the banks. "As a direct result of the Durbin Amendment, consumers have started paying for financial services they previously enjoyed free of charge. Unfortunately, this proves that whenever government tries to control pricing of a product or service, consumers lose."
Before Durbin was implemented, banks were able to charge merchants 44 cents per transaction versus today’s fee of approximately 21 cents.
Although bankers have painted the picture of simply “having their hands tied and the consumer will have to grin and bear it” credit unions have continued to provide low cost and often free products and services to its members.
Amalia H. Melis Marketing & Business Development Manager from Call Federal Credit Union ($350 million, Richmond, VA) says that when it comes to fees, credit unions are a completely different animal than big banks.
“As an industry, we truly care about our members and want the best for them… as a result we don’t want to charge exuberant fees by any means. Instead we want to teach members how to be the financial heroes of their life and have the knowledge and tools to avoid fees.”
Credit unions’ not-for-profit status means just that--credit unions are not out to make a profit, so any fees credit unions impose are typically implemented to cover the cost of doing business, not to make executives rich.
So while credit unions may actively work with members to avoid fees through deepening relationships, news sources such as the New York Times and ABC News say that banks are finding sneaky ways to nickel and dime customers--despite reports that banks are on track to bring in $16 billion in overdraft fees this year.
Checking Account Bank Fees May Be Harder To Detect
Even though it extinguished the $5.00 debit card fee, Bank of America raised the monthly maintenance fee on its most popular checking account by more than $3.00. Chase Bank has more than doubled its checking account fee as well.
According to a Marsh & McLennan study released last year, more than half of all checking accounts were considered to be unprofitable for banks. Between being squeezed by regulations and historically low interest rates, checking account profitability is worse than ever.
Since implementing fees for services such as debit card usage failed, banks say they have simply have no choice but to find ways to recover losing checking account profitability through a fee hike.
Does that mean that the free checking account will become a dinosaur? After many years of free checking, will every consumer have to pay?
Many credit union representatives say that there’s no way free checking will become extinct--at least not in the credit union world. Amy McGraw, VP/Marketing at Tropical Financial Credit Union ($550, Miramar, FL) says that panicked banks are shooting themselves in the foot.
“From my understanding, before everything began to crumble the average household had more than two checking accounts,” she recalls. “As financial institutions began to eliminate free checking and adding fees, consumers who are extremely sensitive to any changes in household costs, needed to consolidate their checking accounts.”
McGraw said that she learned this activity was happening more than a year ago, long before even Durbin was introduced. “If the theory holds true those consumers who migrated away from big banks did so to find a better value; something credit unions have been famous for. As these consumers make their move, credit unions have incredible opportunities to deepen those relationships.”
“Put simply – economies of scale will allow us to keep free checking, provided we don’t panic, and follow through with these new members with a solid onboarding program to engage them with our other products and services,” McGraw adds. Tropical Financial offers free checking with no minimum balance requirement.
Amber Danford, VP/Marketing and Media Relations from Texas Trust Credit Union ($680 million, Mansfield, TX) says that credit unions will always find a way to offer free checking.
“Many credit unions build efficiencies in their operations and service offerings,” she says. “So they can offer lower fees and better rates to their members. It’s in our DNA. Credit unions will continue to look for ways to offer a free checking product because we are member driven.”
Breaking Down the Bank Fees--Which Ones Could Sneak Up On You
Experts are warning the public to be on the lookout for the sneaky bank fee. According to industry experts, fees that may creep up on bank customers include:
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The charge to use another bank’s ATM (different than the ATM surcharge)
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A fee to replace a lost debit card
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Maintenance fees for checking and savings accounts
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Receipt of a printed bank statement
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Receiving a wire transfer
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Making too few transactions per month
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Overdraft penalty fees (according to Pew Charitable Trusts’ Safe Checking in the Electronic Age project, this is the most commonly undisclosed fee on big bank websites)
Don’t be a slave to bank fees, find a credit union now.
So What Are the Banks Charging?
Based on our independent research, some of the biggest banks are charging substantially higher fees than most credit unions. In fact some noteworthy fees include:
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Bank of America charges an $8.95 monthly maintenance fee for an electronic-based account (maintained by the customer)
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Most multinational banks will charge the customer to replace a lost or missing debit card
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Most multinational banks charge the highest fees for overdrafts, averaging $34 to $35
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TD Bank’s senior account has a $10 monthly maintenance fee--most credit unions offer a free account and services to seniors
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Banks like Chase Bank, Frost Bank, Regions Bank and Wells Fargo charge a general monthly account “service fee”
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Non-bank ATM transaction fees range from $2.00 to $5.00
McGraw says that Tropical Financial wouldn’t think of charging the member for something like debit card replacement. “We don’t charge to replace a debit card, but there is a rush charge of $25 to receive it in three days or we will overnight it but that is $45 – and is purely a pass through of what we’re charged, we do not tack anything on for our own benefit.”
Melis too, shakes her head at some of the bank fees. “For foreign ATM transactions we only charge $1.00 and our checking account is free. In fact, instead of adding fees to our checking we add features.”
Although credit unions offer lower fees, some banks say that credit unions are only good for people who want to accept “bare bones” products and services. Danford disputes this claim saying, “I don’t see only barebones options with credit unions. Credit unions offer mobile banking, remote deposit capture, robust online services, convenient hours including Saturdays and same day service and quick loan decision.”
She adds, “Many credit unions like Texas Trust Credit Union, also offer mortgages, insurance, and investment services. And many of us even offer services to small business owners like checking, SBA loans, and lines of credit.”
Bank Fee Research:
Bank of America:
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$12 a month for personal checking
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ebanking (online account) has an $8.95 fee
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Savings account maintenance fees (excluding the youth account) ranges from $5 to $12 a month
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$5 to replace a debit card ($20 for FedEx)
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Overdrafts and NSFs: $35
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Withdraws or transfer funds more than 3x in your regular cycle you are charged an excess withdrawal fee
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Late payment on credit cards (for balances over $100): $25
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Non-BofA ATM foreign ATM fee: $5.00
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Research services: $20 an hour (with a $20 min. fee) : We may charge this fee for research related to your account that we conduct at your request or that we conduct on our own initiative regarding transaction activity or history on your account.
CitiBank:
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Insufficient/Unavailable funds: $34.00
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Clerical research: $25 an hour (one hour min.)
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Counter checks: $5.00
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Wire Transfer (incoming domestic or international): $10.00
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2 debit cards are free; Citibank/AAdvanteage debit card: $25 annual fee for the Basic plan, which earns one mile for every $2 spent; $65 annual fee for the Premium plan, which earns one mile for every $1 spent (waived for CitiGold® clients).
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$10 a month for personal checking
Chase Bank:
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$12 a month personal checking as long as you have direct deposits totaling $500 or more (or $1,500 min. daily balance OR ave. daily balance of $5,000 or more linked deposits) **** other personal checking have a $25 fee if certain requirements are not met.
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Debit card replacement: $5.00
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Non Chase ATM withdrawal, inquiry, transfer: $2.00 U.S./ $5.00 International
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Non-ATM cash fee: 3% of the dollar amount of the transaction OR $5.00, whichever is greater
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Statement copy: $6.00
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Wire transfers/domestic incoming: $15.00
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Wire transfers/domestic outgoing: $30.00
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Insufficient funds: $34 per item
TD Bank:
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TD Simple account (no interest): $3.99 monthly fee
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TD 60 plus: $10 monthly fee with $250 min. daily balance requirement
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Outgoing Wire – Domestic: $25.00
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Non TD Bank ATM transactions: $2.00
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Overdraft Returned: $35.00
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ATM/Debit Card Research: $25.00/hour
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