Dodd-Frank, here is thy sting.
The 2010 legislation that limited banks’ ability to charge some fees left lenders with a choice: Take a profit hit or dream up new fees that aren’t on regulators’ radar.
Many banks are likely to choose the latter, experts say. Bank of America’s since-abandoned plan to charge users a monthly $5 debit-card fee, which set off widespread public outrage late last year, was just the beginning of the onslaught, experts say.
“Banks are going to raise existing fees and institute new ones,” predicts Alex Matjanec, co-founder of MyBankTracker, a consumer-education website. “It’s all part of this push to get back lost income.”
Already, banks have introduced new fees for wire transfers, certified checks and banking through tellers. Others have raised monthly maintenance charges on checking accounts. Next month, TD Ameritrade Holding’s TD Bank unit will start charging noncustomers a $5 fee to cash checks at any of its branches.
Hoping to find a better deal? Look before you leave. PNC Financial Services’ PNC Bank now charges $25 to close some accounts, and it isn’t the only bank that charges its customers on their way out.
The fee rollout is happening as banks try to navigate a changing regulatory landscape. The Dodd-Frank financial-overhaul law, which took effect last year, severely curtailed the “swipe fees” banks charge merchants for processing debit-card transactions. That alone is expected to siphon billions of dollars a year in revenue from banks’ balance sheets.
Bank of America, the second-largest U.S. bank by deposits, estimates interchange-fee regulations will cost it at least $2 billion a year.
Lenders also have taken a hit from stricter overdraft rules, which now require customers to opt in before they can be charged fees for overdrawing their checking accounts.
“Given that the government reduced the income banks get from interchange, banks have no choice but to find another source of income to cover their costs,” says Nessa Feddis, vice president and senior counsel at the American Bankers Association, an industry group representing some of the nation’s largest banks.
Customers are bracing for banks to introduce new fees and raise existing ones—and questions about fees for wire transfers, stop-check orders and other banking services are flooding into consumer-focused websites. About 900 have been posted so far this month on the CreditCardForum site, up from about 200 last January, according to Michael Dolen, who runs the site.
Consumers should expect banks to raise maintenance fees on checking accounts, while simultaneously upping the minimum deposit requirements, says Greg McBride, a senior financial analyst at Bankrate.com.
Customers at Citizens Bank, a unit of Royal Bank of Scotland Group, for example, now have to pay $50 a month if they fall below minimum account balances on some money-market accounts. Meanwhile, Bank of America charges some of its banking customers a $25 fee if they dip below minimums on premium-checking accounts.
In December, Citigroup’s Citibank unit raised fees on some of its checking accounts. Monthly maintenance fees on the lender’s basic-checking accounts jumped to $10 from $8. Also, banking customers have to maintain at least a $1,500 balance, up from zero—or set up direct deposit and pay at least one bill online each month—in order to dodge the fees. Before December, customers could skirt the charges by performing five transactions a month.
Monthly maintenance fees will likely surge even more, Mr. McBride says.
In the hunt for more revenue, banks also will start charging customers for paying bills over the phone as opposed to online, Mr. Matjanec says. Lenders will borrow the fee structure at many airlines, where it costs more for customers to book tickets over the phone.
More banks will take a cue from PNC, which hits customers with a $3 fee when they use a teller to transfer money. Bank of America already charges online customers for making deposits or withdrawals through a teller.
Industry experts expect lenders soon to start charging customers more for the convenience of banking on a cellphone. U.S. Bancorp already hits customers with a 99-cent fee to make a mobile deposit. To see pending transactions on their phones, customers at Mercantile Bank of Michigan have to pay $4 a month.
Overall fees for banking services, such as wire-transfer fees, money orders and certified checks, all will increase, experts predict. TD Bank bumped up a range of fees late last year; it now charges customers $15 for wire transfers, up from $10, and $8 to get a certified check, up from $4.
There are ways for consumers to navigate the fee storm. First, think about consolidating multiple accounts at a single institution. Some will waive monthly maintenance fees for customers who hold more than one account.
Some banking customers also can knock down their monthly maintenance fees. For example, TD Bank cuts $1 off its monthly checking fee to customers who agree to trade in paper statements for online ones.
To avoid racking up ATM fees, consumer advocates also recommend opening a checking account with brokerage firms like Fidelity Investments, which reimburses such fees.
John Lee, a 27-year-old advertising executive in New York, decided to ditch Bank of America in October after the bank announced the $5 debit-card fee and moved his accounts to J.P. Morgan Chase. As a new customer, he was able to get a checking and savings account with up to 10 free monthly ATM withdrawals at outside cash machines. He has also escaped any monthly maintenance charges.
“It’s empowering to not have to pay those stupid fees anymore,” he says.
Attack of the New Bank Fees. (2012, January 14). By Jessica Silver-Greenburg. Retrieved from http://online.wsj.com/article/SB10001424052970203436904577152580991517256.html.