Last week, Chase sent me a notice about their “new and improved” checking accounts. The enhancement? My free checking account is no longer free. That may be improved for them, but not for me. I will be closing that account shortly because it was primarily a pass-through account for freelancing income, which I have little of.
Now, there’s word that Bank of America is testing four new checking options that will make it difficult to avoid a fee unless you have the most basic account with direct deposit, paperless statements, and no teller visits. I actually don’t have a problem with that particular account, because we already do all of that. Other than the no teller visits rule, it’s not a big change from their current basic account, which we have. We might visit a teller once a year to cash in collected change, but we can also cash in change for free at Coinstar if we opt for a gift card rather than cash.
Customers “Want” a Fee
The part of the Bank of America story that makes me stabby is their claim that they’re doing this not to recoup the revenue they’ll no longer receive once interchange fees are capped, but so that we can “compensate them” for the cost of checking accounts. And, this is the best pat, one of their spokespeople says, “Many of our customers choose to have a monthly fee. They like that predictability.”
I have never met one person who liked paying a bank fee. Customers don’t “choose” to have a monthly fee. They either aren’t in a position to receive direct deposits or can’t maintain a high minimum balance, so they’re forced into a fee-based account.
Banks Make Plenty of Money Despite Free Checking
In fact, free checking accounts still make the banks money. They do this in three ways:
1. Bounced check fees. Those fees aren’t going anywhere and banks rake in lots of dough for those, especially since they charge the person who bounced the check AND the person who received the bounced check.
2. Interbank loans. They take our deposits and use them to make overnight interbank loans. The interest is small, but when you’re moving millions of dollars, it adds up.
3. Customer retention. Free checking accounts are basically a loss leader. Consumers are more likely to choose other financial services from the bank where they hold a checking account. This includes mortgages, car loans, credit cards, savings accounts, CDs, money markets, and in some cases, investment accounts. The bank might lose 50 cents a month on a free checking account, but they’re certainly making up for that with other products.
Look, I understand that banks are in the business of making money. I don’t begrudge them that. I’m not even get angry with them for wanting to make more money – that’s the nature of business and their duty to shareholders. The part that angers me is their insistence that customers “want” those fees. No, we don’t. In some cases, we accept them because we have no other option, but no consumer wants them. Banks should just admit they need to make up for the lost money from other fees somewhere and not try to convince the public that they’re doing this for us.
