Bank Fee Watch: No More Free Checking?

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When Bank of America eliminated announced it was eliminating debit card overdraft fees, many observers were puzzled. Why would BoA give up such a big money-making scheme entirely, rather than simply tweak it to fall into line with new regulations regarding overdraft protection and fees, like most other banks are doing? And, more importantly, what kind of new fees would BoA try to push onto consumers to make up for the cash it wouldn’t be pulling in with overdraft charges? Now, it looks like we have the answer: checking fees.

Specifically, monthly maintenance fees for customers who don’t meet minimum balance requirements, and who don’t otherwise do much business with the bank. The specifics haven’t been stated, but a new slew of fees and fine print is expected to be introduced in early 2011, reports the WSJ:

Executives have ruled out a flat monthly fee for all customers and are developing a tiered structure that encourages customers to increase banking activity or use other services to avoid future charges.

Bank of America customers who only want a low-volume checking account will likely be asked to pay for it. Fees will likely be waived for customers who keep their balances high, use bank credit cards or tap its investment advisers.

How much will Bank of America charge? That info hasn’t been announced, though various pricing strategies are being tested around the country. A couple of smaller banks that currently charge checking maintenance fees take from customers as much as $10 or $15 monthly, which adds up to as much as $180 a year.

Again, BofA is expected to roll out the new fee structure sometime in early 2011—so if you’re a customer, you have plenty of time to shop around for an online bank, credit union, or other institution that’ll treat you better.

The WSJ piece offers a little history on free checking, or fee checking, if you will:

Banks typically didn’t charge for checking in the 1970s, but began imposing fees in the early 1980s to offset higher interest rates they were paying on savings accounts.

Oh, so maybe the banks now want to reinstate checking fees because they’re dishing out such amazing interest rates on savings accounts. Could that be the case? Not a chance: A regular savings account with Bank of America pays out an interest rate of 0.10%.

Everybody should be monitoring how this end-of-free-checking scenario plays out. My guess is that many banks will look at this as an opportunity to steal away some BofA customers, and the best way to do that is by differentiating themselves from fee-crazy banks by continuing to offer free checking and other services. But there will probably be some others that will follow Bank of America’s lead and introduce new fees of their own. One lesson I’ve learned: Most banks will add fees anytime they can get away with it.