Is it "anti-bank" to want to keep your money?

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One of the things people sometimes say about me is that I’m “anti-bank.” I assume they say this because of posts like this one, where I derided Wachovia’s overdraft policies. So, am I anti-bank?

Nope, I have bank accounts at Washington Mutual and USAA. I own and use several credit cards, including an American Express card. I have an IRA. I don’t own a safe in my home and wouldn’t keep my money there if I did. I think banks provide a great service in holding your money, paying you interest on it in some cases, making it available to you all over the world through ATMs, and making it easy for you to buy and sell goods and services without carrying a pool-shark’s money roll on your person at all times.

I am very strongly opposed, though, to banks and credit cards that manipulate customers into exorbitant fees. Nearly all consumers are paying bank or credit card fees they can eliminate from their accounts — either by using better money management tools (ours or others’), or by doing business with better banks. Such fees have skyrocketed, more than doubling, over the past ten years, and since we are in the business of helping consumers get more for their (and our) money, helping reduce or eliminate those fees is an easy and nearly-universal benefit. Bank where you won’t get hit with fees — that’s my message on banks. I am no more “anti-bank” than a bad restaurant review is “anti-restaurant.”

But, don’t take it from me. I was doing some research today, and in a few minutes’ time I ran across a set of quotes from bankers, analysts, Congressmen, journalists, and others, and thought, wow, these folks are all just as “anti-bank” as I am.

[…T]he potential for fee income associated with checking accounts has grown dramatically. Initially, it was overdraft charges. For decades, the customer who overdrew his account balance received a stern letter from the bank, was tolerated for a while, and eventually was asked to move his account. As banks have raised their overdraft charges from $2 per overdraft to $20 and more, overdrafts have become a major profit center. And with the development of overdraft protection services, marketed aggressively by third-party vendors and developed internally by many banks, the desirability of building a huge base of checking account customers, even low-balance ones, has been heightened dramatically.

In short, checking accounts moved from a necessary evil—when savings and loans first got checking powers many S&Ls chose not to offer them—to the primary vehicle by which dynamic banks are fueling their growth.

Shattered Myths
Bank Director Magazine – 4th Quarter, 2004

1. Penalty fees for NSF and overdrafts are a huge and growing expense for bank customers. Consumers are paying at least $10 billion per year or as much as $22.7 billion just for overdraft loans, according to CRL’s estimates based on analysts’ assumptions and reported checking account service fee revenue. The total cost to consumers of NSF and overdraft fees at all financial institutions in 2003 was $33 billion, according to Mike Moebs of Moebs Services. CFA found that over a fourth of big banks cite overdraft fees as a source of important revenue.

2. The biggest banks charge the highest fees for NSF and overdraft transactions. Banks in the CFA survey charged an average of $28.57 for overdrafts and $28.09 for NSF transactions. Big banks on average charge five percent more than banks in Bankrate.com’s spring 2005 checking account study which also found that bounced check fees jumped five percent in the last six months. Six big banks in CFA’s survey charge more for paying an overdraft than for bouncing a check. Nearly half of the big banks also charge sustained overdraft fees, some as high as $27.50 per incident.

Letter to Alan Greenspan
Consumers Union – June 8, 2005

Data from regulators show that banks, thrifts and credit unions collected a record $37.8 billion in service charges in 2004, more than double what they took in 10 years earlier.

Roughly 45 percent of those fees came from customers overdrawing their accounts, according to an estimate by the Center for Responsible Lending.

Banks follow a simple rule: Charge!
Pittsburgh Post-Gazette – November 06, 2005

Bounced-check fees are among those unusual expenses that many people are willing to pay without putting up much of a fight, said Steve Williams, a principal at consulting-firm Cornerstone Advisors in Scottsdale.

Such acceptance perhaps stems from consumers themselves having triggered the charges because of their own oversight.

Banks have found segments of the population who just pay up,” he said.

Watchful eye can avoid bank fees, penalties
The Arizona Republic – April 24, 2006

Among the report’s findings:

• Credit card charges in the United States exceed $1 trillion dollars as of 2005, with an estimated 691 million cards issued to American citizens. Total American household debt, including credit card debt, came to $830 billion by the end of 2005.

Penalty fees for actions such as late payments have more than doubled in the last ten years, from $13 in 1995 to as much as $34 in 2005.

Card issuers now charge a variety of “hidden” or additional fees, such as charging for payments made over the phone, cash advances, and balance transfers. These fees can range from $10 to $31, depending on the transaction.

• Exceedingly high interest rates — often as much as 30 percent — are charged when customers miss a payment.

Credit Card Fees Rise, Disclosure Statements Inadequate
General Accounting Office (via ConsumerAffairs.com) – October 12, 2006

It is the punitive fees that are taking the biggest bites out of consumers’ wallets.

The average bounced-check fee, often referred to as a nonsufficient-funds fee, or NSF fee, by your financial institution, is now at a record high of $27.40. This is up from $27.04 in the spring edition of the survey. Bounced-check fees were on the move, even more than normal. There were 85 accounts posting increases in the bounced-check fee and just 32 decreases, compared to 39 increases and 19 decreases in the past survey.

ATM surcharges, the fee charged by ATM owners when you don’t have an account with them, hit a record for the third consecutive survey. The average ATM surcharge is now $1.64, up from $1.60 and $1.54 in the spring 2006 and fall 2005 surveys, respectively. The trend toward higher surcharges is unmistakable: Since the last survey, 22 banks boosted these fees, six reduced them.

It’s not only the increased amount of the fee, but the increased frequency with which consumers encounter the fee. Just how prevalent is the practice of ATM surcharges? Of banks owning ATMs, the percentage that assess surcharges is the highest on record — 98.3 percent. To put that in context, the survey found the same percentage of banks, 98.3 percent, provide their account holders with online access to their accounts. So ATM surcharges are as commonplace as online account access during the Internet Age.

Bankrate’s fall ’06 checking study: Fees rise again
Bankrate.com – October 30, 2006

Bank fees are a powerful source of revenue for America’s financial institutions, and one of consumers’ top headaches. If it feels like the bank fee noose has closed tighter around your neck in recent years, it has. The Federal Deposit Insurance Corp. says the nation’s largest banks now generate 44 percent of their revenues from fees. Estimates of how much that amounts to vary between $30 billion and $50 billion a year, but it’s clear banks are rolling in money they take from customers, often without explaining themselves very well.

How do banks make all this money? Let me count the ways. A $20 withdrawal from the wrong ATM costs an average of $4 in withdrawal fees. An attempt to withdraw $500 from the wrong ATM can result in a rejection and a $1.50 ATM withdrawal fee. Getting close to an empty account? Don’t worry, your bank will automatically provide you with overdraft protection, for $31 an occurrence. BusinessWeek recently told the story of a college student who used a cash card linked to any empty account to purchase seven Christmas gifts for a total of $230, then was hit by $217 in overdraft fees.

Then, there are crazy credit card fees, like the over-limit fee. If you spent a lot on plastic during the holidays and are near your limit, beware: Banks can lower your credit limit, citing a credit risk, and then charge you an over-limit fee.

A QUEST FOR ‘MORE INFO’ ON BANK FEES
MSNBC – January 12, 2007

For the third time in 20 months, Bank of America Corp. has increased the fees it charges customers who overdraw accounts or bounce checks.

The fee for each overdraft or returned item during the first day an account is overdrawn was increased from $19 to $20, and the fee for each overdraft or returned item on subsequent days was set at $35.

The Feb. 16 change eliminated the middle tier in the bank’s overdraft fee structure. Previously, the bank had assessed a $33 fee per overdraft or returned item for the second, third and fourth days an account was in imbalance, and charged a $35 fee for each additional day….

A Bank of America employee, who asked not to be identified because he was not authorized to speak officially about fees, said bank software regulates whether an employee can erase an overdraft charge and grant a rebate to a customer who complains about the charge.

Bank of America again raises fees on overdrafts
The Boston Globe – March 1, 2007

Certainly, there’s a problem with bank and credit card fee revenue, but the problem isn’t me. It’s not anti-bank to want to keep your money — isn’t saving money what banks are supposed to be all about?

5 Responses to “Is it "anti-bank" to want to keep your money?”

  1. credit card analyzer Says:

    It goes right with amost all banks and credit card companies to charge you fees for nearly each operation you make with your card. It’s nor fair but most consumers do not realize it and creditors make substantial earnings on it. What’s more, cardholders don’t even try to find a better bank… if there really is any…

  2. James Gardner Says:

    Hi Marc,

    As one of those who have previously alluded to anti-bank marketing from many Web 2.0 startups (not just Wesabe), I take your point that lots of people are angry with bank fees. Disagreeing with a fee doesn’t make anyone anti-bank. In fact, if you’re charged a fee and can’t explain why, it only makes good sense to question it and get it reversed if possible.

    What is anti-bank, however, is suggesting that sensible institutions would manipulate their customers into situations where they pay these fees. “Manipulate” implies setting up a situation where customers, regardless of their own choice and actions to avoid a fee, have to pay one anyway. As you correctly point out, Wesabe helps customers by making sure they have the tools they need to avoid these fees.

    On the other hand, customer centric banks are looking to ways to delight their customers by helping them avoid fees themselves. Expect to see more of that in the future.

    Just one other point: there is a reason for fee increases. Its because the revenue associated with interest margin is going down, largely thanks to very greatly increased competition for deposits. Admittedly, some of the fee increases that we’ve seen are excessive.

    I enjoyed your post.

    Disclaimer: I work for a bank, but hope you’ll find these arguments are unbiased ones.

  3. Darren Says:

    I have no problems with most of these bank fees. Essentially, fees on people who are irresponsible save those of us who responsibly manage our money. The reason the I can receive good interest on both my savings and checking accounts (and rewards on my CC), is that stupid people are willing to carry a balance on a card, or pay an ATM surcharge, whereas I’m not willing to do the same. There is a cost for ignorance and a reward for educating yourself, in all cases.

  4. fay shah Says:

    is bank of america safe to keep our money there

  5. fay shah Says:

    is bank of america safe to keep our money .

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