Is Your Bank Killing Free Checking?
Intense customer backlash over new bank fees has led some big financial institutions to backpedal on them in recent months, but at least one is ushering in new charges guaranteed to be unpopular with customers.
Wells Fargo (WFC) stopped offering free checking to new customers in 2010: Now, it's introducing a $7 monthly charge in six (thus far, unidentified) states for customers who had opened free checking accounts before the cutoff.
The new fees will kick in May 4.
There are ways around the fee. Customers who maintain a minimum daily balance of $1,500 or have direct deposits of $500 or more going into their accounts each month won't be hit with the $7 fee. If a customer below those thresholds is willing to receive online statements instead of monthly mailings, the $7 monthly charge will be reduced to $5.
The ultimate avoidance mechanism, of course, is to leave your bank if it introduces new fees. However, this is a copycat industry. If a major institution is making money in a new way, you can be sure that rivals will follow.
Debit Card Fees Revisited
Banks' fee hunger is a theme that is becoming all too familiar: Bank of America (BAC) and several other financial giants tried to introduce a monthly $5 fee to account holders who use their debit cards for purchases late last year. After a groundswell of public displeasure, Bank of America ultimately had to nix the notorious charge before it officially kicked in.
It probably didn't help that Bank of America is often seen as TARP's poster child, and taxpayers found it easy to turn on the company they'd bailed out two years earlier. Wells Fargo took a bit more than half as much in federal cash as Bank of America did at the time, though both companies went on to repay the loans.
The Customer Is Eventually Right
These are challenging times for banks. Regulators have tightened their lending standards, limiting the financing heart of banking. Interest rates are also virtually zero for savers. Interest-bearing accounts and short-term CDs yield practically nothing.
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Banks have resorted to sector consolidation, snapping up smaller players to improve their cost structures. That clearly isn't enough, and in this climate some of the banking institutions feel that their only option is to milk more revenue out of their customers.
As long as the clients stick around, why change?
"Our customers' voices are most important to us," Bank of America announced in last year's decision to reverse the debit card fees. "As a result, we are not currently charging the fee and will not be moving forward with any additional plans to do so."
Unless Wells Fargo customers speak up loudly, this new fee is going to stick. Look for the protests to start around the time that the six states to be affected are actually identified.
Longtime Motley Fool contributor Rick Munarriz does not own shares in any of the stocks in this article. The Motley Fool owns shares of Bank of America and Wells Fargo. The Fool owns shares of and has created a covered strangle position in Wells Fargo.
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