After facing the biggest customer backlash in recent memory over its decision to implement a $5 per month use fee for customers using a Bank of America debit card, the banking giant has reversed course and announced that it will not charge the $5 debit card fee starting next year. This news comes on the heels of news from several other major banks, like Chase and Wells Fargo, announcing that they would not charge a monthly debit card fee.
More recently, several regional banks, including SunTrust and Regions, that had already been charging a monthly fee to use a debit card had to abandon the fee once it was popularized by the media in the wake of Bank of America’s decision to implement the fee. One can only wonder how their customers reacted prior to BoA implementing the fee.
The lesson from all of this is that customers need to be very watchful of banking fees and charges. Do not just throw away those notices you get from your bank that are full of fine print, and carefully scrutinize your statements each month to ensure that no new fees are draining money from your accounts.
As a long-term solution, consider switching to a local bank with lower fees or a credit union. Credit unions reap certain tax rewards which allow them to profit without having to gouge deep into their customers to generate revenues.
Beware especially of your free checking account being subtly converted into a non-free checking account, without having the words "free-checking" removes from the name of the account. The current favorite is to implement or raise the minimum balance required for a "free" checking account. Whenever your balance drops below the minimum, you’ll be charged a fee. If you account drops below the minimum on a regular basis, that is the same thing as paying a monthly fee.
Again, watch your bank statements closely. While your bank can’t lie outright to you, they won’t make it easy to spot. Expect something financial sounding to throw you off the trail. Be sure that you know what every charge on your account is and call the bank to ask for an explanation of the ones you don’t understand.
Banks Charge High Fees Because They Can
As a former financial advisor I would review statements that people brought in. Oftentimes, they had no idea what they were paying or being charged. They just made sure that their balance never went negative and that was it. Everything else just slipped under the radar. This happened to both wealthy and lower net worth clients.
One client was paying $35 per month because they never set up a direct deposit that they were supposed to in order to get a free checking account. Turns out they had been paying the bank fee for so long, they thought it was one of their monthly bills!
Banks gouge customers with high fees because they can. When you don’t pay attention, fees slip by without complaint.
When you do pay attention, a cranky phone call is likely to get the fee removed. The bank knows that as long as you don’t close your account they can continue to charge you all the other fees you don’t notice or complain about. In fact, they know the odds are good that if they charge you the same fee in the future, you won’t complain about it.
Banks count on the fact that it can be a pain to transfer accounts. As long as they inflict small enough wounds to keep you from leaving, they win.
Don’t be a sucker. No matter where you bank now, open a second savings and checking account at another bank or credit union. You don’t have to use the accounts, just leave them there. If you ever do have to change banks, your new accounts are already ready and waiting. And, you’ll know if they are really free or not. If a mysterious charge appears, close the account and find a new bank.
Not all banks are terrible, but the ones that are aren’t really afraid of you leaving. Even if YOU leave, there are plenty of lemmings left to be led to the cliff.
New Bank Fees Coming
Make no mistake, Bank of America and other large U.S. banks have made promises and revenue projections that they cannot keep by earning money on banking. Instead, they must find ways to boost traditional revenue streams. Having already raised every fee they have to the maximum amount they think they can get away with, the only course of action is charge new fees, somewhere, somehow.