Even now, after all those bailouts, banks never seem to tire of dipping a little deeper into your wallet. Despite the tough economic times and increased scrutiny from Washington, they are keeping most fees at record highs, and are eking out slight increases on others like overdraft charges — a step they rarely took during past recessions.
The result? Americans are paying more to save and spend their money.
And while the increases are still relatively small by historical standards, they illustrate how banks are looking for almost any nugget of income to help offset huge loan losses and lower revenue as consumers buckle down on spending.
The nation’s biggest banks — those that received the biggest bailouts from taxpayers, and are once again gaining strength — charge fees that are on average at least 20 percent higher than those at smaller lenders, according to Moebs Services, a economic research firm used by banks and federal regulators.
Some of the charges are getting more creative. Several big banks — including JPMorgan Chase , US Bancorp and Wells Fargo — recently began billing some small-business customers for federal deposit insurance increases. Citigroup and PNC Financial assess around a 3 percent international transaction fee when customers swipe their debit cards overseas.
Bank of America recently introduced a raft of changes. In June, it raised the fees on its basic monthly checking account to $8.95 from $5.95. In April, the bank considered raising its overdraft charge to $39, nearly double what the typical bank charged a decade ago. It backed down only after an eruption of consumer complaints, tweaking its rules to keep its initial fee at $35.
And then there are credit cards: banks are scrambling to raise rates and fees before a credit card reform bill that President Obama signed into law last month takes effect. JPMorgan Chase recently announced it would raise some balance transfer fees to 5 percent, from 3 percent, in August. Citigroup, Bank of America and other lenders have also been raising the interest rates for millions of cardholders.
Over all, fees at the biggest banks are running at their highest levels on record. The average A.T.M. charge, which generates billions of dollars for banks annually, rose at the end of 2008 to $1.97, up from $1.78 the year before and nearly double the 89-cent average recorded in 1998, according to Bankrate.com.
Other charges are more eye-popping: today’s typical $30 stop-payment fee is about twice as much as a decade ago, according to Moebs.
But the most unexpected change has occurred in overdraft fees — the industry’s most lucrative and controversial charge — where the typical fee rose to $26 after five years at $25.
That is only a modest 4 percent increase, compared with the double-digit overdraft fee increases a few years ago, when charges rose to $25 from $22. But amid intense scrutiny from regulators and lawmakers, consumer advocates — and even some bankers— are surprised.
“We’ve never seen a price increase during a recession,” said Michael Moebs, the chief economist and founder of the research firm that analyzed the fee data at more than 2,200 lenders. “What the bankers are saying is that I want to maintain my revenue.”
Scott E. Talbott, a lobbyist for the Financial Services Roundtable, said that the banks’ fees reflect the cost of providing those services and the rise in overdraft charges reflects increased risk. “There is an increased riskiness around repayment because of the recession,” he added.
Most banks have been reluctant to raise overdraft fees or have made subtle but potentially lucrative changes to how they are assessed. Bankers are worried about criticism from Washington and would rather find ways to bolster profits under the radar.
For instance, many banks already generate rich profits by charging consumers high interest rates for loans, while keeping interest rates paid on money market and checking accounts low — a trend that has become more acute as the Federal Reserve keeps rates near zero to help stoke an economic recovery.
But that may not be enough. Large banks, which tend to charge the highest fees, incur a range of expenses that smaller banks do not, including high nationwide advertising bills and the costs of operating networks of A.T.M.’s and retail branches. Many smaller banks are also struggling now more than ever to offset losses and dwindling revenue.
And as consumers themselves rein in their finances, raising the overdraft fee has become an easy option. With fewer customers overdrawing their accounts, overdraft fees risk shrinking to a smaller income stream from what Moebs estimates is a $38.5 billion business this year. That is, unless banks raise fees on customers who run into trouble.
Aaron Fine, a retail banking consultant at Oliver Wyman, said that overdraft fee income could fall 5 to 20 percent for some banks in the second and third quarter. “That is the multibillion-dollar question,” he said. “How do you replace those fees with something else?”
Two large regional banks, which have been hit hard by the recession, appear to be struggling to find answers.
KeyCorp, a regional lender based in Cleveland, raised its overdraft fee by 50 cents to a dollar for repeat offenders in the last few months, bringing its maximum charge to as much as $39. Comerica, which has big operations in Michigan and California, raised similar fees by approximately $2 to $3 when it introduced a tiered fee structure that charges $25 to $37 as the number of offenses increase.
Regulators and lawmakers say they plan to crack down on excessive service fees, just as they did with a new bill barring unfair credit card practices. Federal Reserve officials have proposed new rules that would let debit and A.T.M. customers “opt in” for overdraft protection, or allow existing customers to opt out of the service.
Representative Carolyn B. Maloney, Democrat of New York, introduced more stringent legislation this spring requiring banks to notify customers before they overdraw their accounts.
Of course, consumers do not have to be taken in. Consumer advocates suggest comparing the fees charged by big banks with those of credit unions and community lenders in a given area. When possible, use an A.T.M. in the bank’s network. And if you do incur fees, ask your bank manager about waiving them.
Greg McBride, a senior financial analyst at BankRate.com, said that as banking fees head into overdrive, consumers simply need to be more alert. “We will have to be on our toes to avoid getting tripped up,” he said.