You should expect bank fees to go up again this year. How can that be? Customer outrage just forced Bank of America and several other big banks to scrap plans to charge a monthly debit card fee.
Bankers still need to replace billions of dollars in lost revenue that have resulted from the sluggish economy and new federal regulations. These new rules slashed the fees banks charge merchants to process debit card transactions and cut revenue from overdraft protection.
“I think we’re going to see them try to impose fees wherever they can do it,” says Greg Daugherty, executive editor at Consumer Reports. “We’re already seeing fees for paper statements and higher safe deposit box costs. Some banks, like Chase and PNC, are even charging customers a $25 fee to close accounts in certain circumstances.”
Higher fees are likely on various one-time services: Certified checks, money-orders and wire transfers. There may be a charge to use a teller, pay by phone, or cash a check from another bank.
Greg McBride, senior financial analyst at Bankrate.com, expects banks to boost their monthly maintenance fee and make it harder for you to avoid that fee.
“It’s what you might call a stealth fee increase,” McBride says. “The fee itself may not go up, but if the balance requirement goes up to get free checking, it amounts to a fee increase for the people who didn’t used to have to pay the fee and now do.”
You should also expect higher ATM fees for non-customers and higher penalties for overdrawing your checking account.
Overdraft fees are already in record territory. According to a study released last week by Moebs Services, an economic research firm, the median overdraft fee jumped from $27.50 at the end of 2010 to $30 last year.
“That’s the largest increase we’ve seen in 30 years,” says CEO Mike Moebs.
Customers will pay if the fee makes sense
Mark Schwanhausser is a senior analyst at Javelin Strategy and Research, a consulting firm for the banking industry. He says customers won’t fight all fees, just the ones that don’t make sense.
“You want to charge me because I want to pay my bill with my debit card? That isn’t something I want to pay. In fact, I’m going to be mad about it,” he says.
Schwanhausser believes bankers have learned their lesson: Customers are more likely to accept a fee if it’s for a premium service that provides real benefits.
“We’ve encouraged banks to rethink things from a consumer point-of-view and not just from a punitive fee point-of-view,” he says. “What’s the added value for them? If there’s added value, then charge for it. If there’s not, then think hard about it.”
For example, Schwanhausser says people see the benefit of an expedited payment if it will prevent a late fee.
Javelin released updated data on Wednesday showing that 5.6 million people who bank switched banks in the past 90 days, a threefold increase over the previous period. A little more than 1 in 10 cited “bank transfer day.”
Make it easier to understand fees
Many people pick a financial institution based on the location of ATMs and branch offices. The smart way to make that decision is to compare fees, terms and conditions. But that’s not easy to do.
According to a study by the Pew Health Group’s Safe Checking in the Electronic Age Project, the median length of the disclosure forms for checking accounts at the 10 largest banks in the U.S. is 111 pages. These banks have 54 separate fees.
“These fees have an impact, so consumers need to know what they are getting themselves into,” says Susan Weinstock, director of the Safe Checking Project.
Food products are required to have nutrition information labels. Pew wants banks to use a standardized disclosure box to make it easy to see the fees and compare them.
“It would be on bank websites and in bank branches and consumers could go online and they could look at different financial institutions and decide which one best meets their financial needs,” Weinstock says.
How to fight back
“You need to have both eyes wide open,” advises Bankrate.com’s McBride. “Read any correspondence you get from your bank, whether it’s by snail mail or e-mail.”
Look at the fee schedule. Watch for changes in the account terms. Odds are they’re not in your favor.
Don’t simply accept a new or higher fee – especially if you have more than one account with the same financial institution. Customers with multiple accounts are the most profitable. Try to negotiate. See if they’ll waive the fee. Ask if there’s a different type of account that’s better for you, one with no fees or lower fees.
If that doesn’t work, you may want to move your money.
“We’ve found that credit unions, online banks and local community banks tend to be cheaper than the big banks,” says Daugherty, at Consumer Reports. “That’s where we’d suggest people look next.”