Bankers say they don't want to charge you fees when you bring your business to them. They'd certainly rather have a real relationship—giving you a checking account, for instance. Still, moneymakers also would like to manage your mortgage, credit-card and auto loan. When such relationships were more common, most fees were waived.
Yet like most relationships, however, the arrangement between banks and consumers has gone sour in recent years. The Internet has made shopping for a loan, credit card, even where you deposit your paycheck to all 50 states, easier — posing more of a competitive challenge to banks. "Now you get your services from three different banks," said Hank Israel, a partner at the financial-services consulting firm Novantis. "Each has to find a way to make a profit."
The number of fees a given bank charges has gone down recently, from more than 40 to 26, according to Pew Charitable Trusts. However, you only need to read banks' financial reports to see that fees are a big part of their business model going forward.
Click ahead to see the fees that are causing the most trouble for banks and their customers.
By Paul O'Donnell
Posted Oct 23 2012
When we overspend our account with a check or debit card purchase and the bank covers it, we have to make good, right? Overdraft penalties, which average from $30 to $34 nationwide, theoretically act as a deterrent. That pays the bank's costs for papering over our errors.
In fact, there is little correlation between a banks' cost to administer bounced checks or overzealous swipes. Overdraft fees, like most bank fees, are set by what the competition is charging. Nor are overdraft penalties related to going interest rates: charging $34 for covering the average overdraft of $36 for a week (when banks usually hit overdrawn customers with a second, "extended overdrawn balance" fee) amounts to a 5,000 percent annual interest rate.
Some of the most disconcerting fees are for services that were once a given, like sending customers a monthly statement of their account. Many banks now charge $2 to $3 a month for paper statements, or more if you want copies of your checks. As with overdraft penalties, the banks claim they are merely encouraging good behavior—this time in the name of the planet. "It's reflective of our commitment to be green by encouraging customers to use electronic statements," a U.S. Bank spokesperson recently told the Cleveland Plain Dealer.
The banks, howver, may be looking for another kind of green. Wells-Fargo's "Value Checking" charges monthly fees for sending images of cancelled checks — whether the customer wrote any checks that month or not — blurring the correlation between trees and fees.
At any rate, banks could as easily reward customers who opt for electronic-only statements by crediting their accounts $2 a month, passing on the savings in paper and mailing costs.
A barrage of commercials has introduced this cool new use for smartphones: customers take a phone-photo of a check and messaging it to the bank. But at least one bank has begun charging 50 cents for each remote deposit, while others are studying what one banking consultant calls a "gutsy" move. Meanwhile, remote deposits will save the bank enormously in the long term, as they lessen the need for automatic tellers and human ones. This would facilitate a move of more customers over to online banking and bill paying. Bill pay is free, you say? That's what people once said about ATMs.
Automatic tellers were introduced to the public both as a convenience — cash was available at any bank's machine for free — and a cost-saver. After all, automated transactions are almost always cheaper than those performed by staffers. But by the late 1980s, banks started doubling down by using ATMS as, well, cash machines. Fees were imposed for taking cash from rivals' ATMs, for using ATMs abroad, for point-of-purchase transactions. "Denial fees" even tagged your account when a withdrawal was denied.
In 2011, Bank of America customers shouted down the bank's attempt to charge $5 a month for the privilege of having a card. But ATM usage fees still exist in the form of maximum transaction fees, with some banks limiting customers to 25 transactions a month. (You try it.) And fees for using another bank's ATM have continued to rise, to a record average of $2.50 in 2012, according to a recent banking industry report.
Much of the anger over fees has arisen when banks charge for services that used to be free: tellers checks, wire transfers, replacement debit cards. Many of these, however, only appeared to be free because fees were waived for "relationship customers." Those fees are now enforced, bringing a host of previously unheard of charges for even the smallest actions taken on customers' behalf. Wire transfers cost $15 incoming and $20 going out at Regions Bank, for instance. However, if you want an email notifying you that a transfer went through, you'll pay 25 cents—plus tax where applicable.
After charging customers outright for talking to their employees lost banks customers, they have turned teller fees around. Today, they are presented as as ways to avoid a fee. Bank of America, for instance, drops the monthly maintenance fee for its electronic banking checking account if customers "use only self-service options for your deposits and withdrawals," meaning "a teller or other bank associate does not help complete the transaction." Other banks also levy hefty fees on online-only customers for anything exotic.
Banks blame their fee-dependency chiefly on the Durbin amendment to the , which set new regulatory caps on card-swipe fees. In response, many institutions are now pushing prepaid cards, with low fees to establish the account and get access to cash.
Customers like prepaid cards because they are free of maintenance fees. Meanwhile, overdraft penalties are non-existent, since the customer can only spend what the amount they have loaded onto the card. Banks like them because they are unfettered by regulation—meaning they can raise fees as they like once they catch on. (Some experts think prepaid cards could replace traditional debit cards altogether.)
For now, the banks are touting prepaid cards to "the unbanked": low-income customers who have a difficult time maintaining traditional bank accounts. Ironically, Pew Charitable Trusts recently found that it's checking fees, particularly overdraft penalties, that are most responsible for driving lower-income consumers to abandon checking accounts in the first place.