How much does your bank account cost you? An article by Nancy Trejos and Jonathan Starkey in the Washington Post this weekend looked at how banks have been increasing fees for overdrafts and ATM usage. It's full of statistics designed to irritate: "the average ATM surcharge in 2008 was up more than 10 percent," and "Bank of America this year raised the maximum number of times customers can get hit with overdraft fees from five a day to 10," and "overdraft revenue will reach $38.5 billion this year."
Are these fees a new necessity, part of what Anne Pace, a spokeswoman for Bank of America, calls "a landscape that has changed"? I asked John Hall, from the American Bankers Association, whether the increase in fees would really make them a big part of bank profits.
Hall said no, that deposit account fees (the ones most normal customers are subject to) make up less than 10 percent of most banks' income, with the great majority still generated by making loans. But a bank's small potatoes are still worth a lot more than your small potatoes.
So what's the rationale for the fee increase? Think of it like a parking ticket, Hall says. The fees are there to train customers to use their accounts responsibly -- if the fees too low, they provide no deterrent to practices that eat up a bank's resources.
If they get too high, the repercussions for customers can be devastating. The cases cited in Trejos and Starkey's article offer frightening worst-case scenarios, but Hall told me that in a 2008 study by the ABA, 65 percent of customers said that they paid $3 or less in monthly overdraft fees. He also told me that most customers, given the choice, prefer "free checking" with penalties to accounts that come with built-in maintenance fees.
If it were up to you, which would you pick: paying the bank for its services in small, annoying fees, or trusting that their financial betting practices are safe enough to provide those services for "free?"
categories: News
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