New bank laws mean new bank fees
The article linked to above lists the new-and-increased fees at many of the nation's major banks, and that list includes some doozies. Some of them have been around for a while, but are creeping into other areas; for instance, while Bank of America rolled out annual fees on some credit cards earlier this year, now it's adding new monthly maintenance fees to certain kinds of checking accounts, as well. It appears that a growing number of banks will be adding monthly maintenance fees -- some as high as $30! -- to some customers' accounts unless certain requirements are met.
Banks are also raising minimum balance requirements, in part so they can charge maintenance fees to customers who drop below those thresholds. In response to consumers opting to link their checking account to a savings account or line of credit to avoid overdraft charges, banks such as Wells Fargo and HSBC charge by the transaction or by the day every time that secondary source of funds is tapped.
As frustrating as this might be, says Jean Ann Fox, director of financial services for the Consumer Federation of America, don't believe the people who say this is the fault of laws like the CARD Act and the new overdraft rules. Customers were already paying, she points out, when they would inadvertently overdraw their account, use an out-of-network ATM or some other unwitting transgression. The difference was that previously, you weren't apt to find out about those charges until after the fact.
"One of the objections to the overdraft situation is that those fees were hidden," she says. Now, banks are forced to be more transparent about all the ways they're trying to part you from your dollars. "On the one hand, banks have to be careful that the cost of using their service is fair and understandable, but on the other hand, I'd rather have the price you pay to use a bank account up front rather than tacked onto the back end," Fox says. "If the bank's going to take money for providing you with a bank account, it's much better for that price to be stated up front."
So, what's an ordinary American to do if they don't want to be nickel-and-dimed into poverty? Fox says it's important to read all the fine print about fees if you're opening a new bank account. If your long-time bank has started piling on the charges, shop around for one that doesn't leave you feeling "gotcha'ed" when you look at your statement every month, then read our post on how to go about switching banks. We lay it out for you in easy steps.
Fox adds that the history of the "free checking" most of us have gotten used to over the past decade or so is directly tied to banks' previously unfettered ability to charge for things like unexpected overdrafts. Free checking was a lure to low-balance (and, often, low-income) customers who didn't have enough in their account to meet the minimum balance requirements that had been the norm before the widespread advent of free checking. One side effect of people having very little in their accounts, bank executives realized, is that they'd frequently run out of money and be easy marks for overdraft penalties. In other words, don't think of free checking as a perk. Think of it as bait.