Banks are charging record-high fees for existing services such as account maintenance and overdrafts. But banks are also getting creative, rolling out services — and fees — that never existed before. For instance, at one bank, if you’re sick of waiting on hold to talk to a customer service rep, you can pay a fee to cut the line.
According to MoneyRates.com’s new semi-annual survey of bank fees, it’s more expensive than ever to be a bank customer, especially at a big national institution. At big banks, the average monthly service fee was just a shade under $14; to avoid it, you need to keep an average minimum balance of more than $8,400. “This time around, the average monthly service fee, overdraft fee, and ATM charge for non-customers all hit the highest levels we’ve seen,” MoneyRates spokesman Richard Barrington says.
“Big banks are leading the trend towards higher monthly service fees – not only are their average fees higher, but the percentage of free checking accounts at big banks is roughly half what it is at medium and small banks,” he says. Only 22% of accounts at big banks don’t come with a service fee, compared to 43% and 48% for medium and small banks, respectively.
In some cases, these fees aren’t merely inching up; they’re growing by leaps and bounds. Fifth Third’s basic checking account now costs $11 per month unless you keep $1,500 or more parked with the bank. And while many such fees are waived if you have direct deposit, Fifth Third is trying something we hope other banks don’t start imitating: It only knocks a measly three bucks off that fee, so you’re still on the hook for almost $100 a year if you’re below the minimum balance threshold. (The exceptions are if you’re military, a student or if your employer has enrolled in a Fifth Third “banking benefits” program that you participate in.)
Recently, Sovereign Bank doubled the maintenance fee on its standard checking account, bringing it to $10 a month. Customers can avoid it with $500 or more in direct deposits monthly, but they’re not happy about the change, according to the Boston Globe. “I’ll probably end up canceling because I’m not going to pay $10 a month,” Sovereign customer Helen Palmer tells the newspaper.
While way more people gripe about fees than actually do something about it and switch, banks shouldn’t take their customers’ willingness to pay for granted. A new Deloitte study shows that a big fee hike can be the catalyst for people to close their accounts. The prospect of a $5 fee hike like Sovereign’s prompted 22% of respondents to say they’d “definitely” switch banks, and another 36% said they’d “probably” switch. Those percentages climb with the amount of the increases; a $10 fee increase made more than half of respondents say they’d definitely switch banks.
Some banks seem to have gotten the memo. No, they’re not getting rid of fees. Instead of just jacking up existing fees, they’re finding new things to charge for and, so far, at least, they’re keeping the amounts modest. This sort of fee creep isn’t quite as objectionable to consumers, since you at least have more choice whether or not you want to pay. But this is where things get a little strange.
At Union Bank, “$1.50 a month will put customers at the head of the telephone queue when calling the bank — a service popular with time-crunched doctors and lawyers, bank officials said,” the Los Angeles Times states. The bank is also going to start charging $1.50 a month for online bill pay next year.
New York-based M&T Bank is adding new fee-based services, says the Buffalo Business Journal. For a flat fee of just under $5 a month, the bank will waive the penalty fees it normally charges customers who use other banks’ ATMs. For another $4.95 a month, it will refund the fees those other ATMs charge non-customers. Also for $4.95 a month, customers can get checks and a safe deposit box, or a waiver of the transfer fees charged to avoid incurring an overdraft. And for $2.99 a month, customers can get access to their credit score.
It seems pretty clear that bank fees are continuing on an upward trajectory, and these institutions are experimenting with all sorts of ways to make them palatable to customers. Actually offering an optional service and charging for it might be less objectionable to customers than maintenance fees that keep creeping up even if nothing new or extra is provided.
To some, the new model may seem innovative. To others, it’s just more nickel-and-diming. Would you mind paying a little more to get a little more? Or does it feel like banks are adopting the airline model, where everything — even a shorter hold time — has a price?