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Banks adding in new fees to replace debit fee
MADISON, Wis. (11/23/11)--Thanks to Bank Transfer Day and other consumer backlash against bank fees, big banks have backed down from charging debit card usage fees.  Or have they? Some sources are reporting a boost in other types of fees to make up for lost revenue.

Whatever the banks' new strategy, credit unions continue to make hay of the debit card fee debacle prompted by Bank of America's $5 a month fee to use debit cards. That fee has been rescinded, and other big banks that considered the fees abandoned them.

But as the eighth week begins since BofA unveiled the fee, media reports continued to stream in about credit unions gaining members who moved their accounts from banks to credit unions. Although not as frequent as the reports leading up to Nov. 5th's Bank Transfer Day and the week after, the reports are still going strong in national, regional and local media.

Still, credit unions and consumers should stay alert to new fees from the big banks. Credit unions can continue to promote their own no-fee or lower-fee policies to attract members fed up with high fees.

Just because the banks took certain fees off the table doesn't mean they have consumers' best interests at heart,  John Ulzheimer, credit specialist at SmartCredit.com, told CNNMoney (Nov. 21). Ultimately, a bank's bottom line comes first, he said, noting financial institutions constantly look for ways to grow revenue through fees, lower deposit rates or higher credit card interest rates. Ulzheimer also told CNNMoney that banks don't care what their customers think about them --so long as the customers  keep using their services. "Banks care when they lose money--that's about it," he said.

Money Magazine reported that despite the mass retreat of banks, they are "still looking to recoup the $7 billion a year they'll lose to new limits on the debit swipe fees that merchants pay" (infotumbler.com Nov. 17).

Banks are having to rejigger their business models," said Richard Barrington of MoneyRates.com. "They'll start charging for things you took granted."

What kinds of fees are banks charging?

  • New or increased checking account maintenance fees. These  "seem to be sticking, so expect more action there," said Money.  For example, Citibank is raising both monthly charges and minimum balances.  US Bank doubled its monthly checking account fees to $2 a month.  The article suggested avoiding monthly checking fees by banking where the consumer's  mortgage is, using direct deposit, or meeting balance minimums in deposit or investment accounts.  But since interest rates on savings are low, it doesn't make sense to put thousands of dollars in a bank just to save $10 a month, said the article.  David Robertson, publisher of The Nilson Report, indicated that switching to another big bank won't help. He suggested trying credit unions or online banks instead. (The article also linked to credit unions' aSmarterChoice.org to find fee-free accounts. )
  • Increased replacement card fees. CBS News reported Nov. 15 that many banks are quietly increasing existing fees and creating new ones (digitiad.com Nov. 16).  For example, BofA now charges $5 to replace a debit card. But, if the customer needs the replacement quickly, it charges $20 to FedExpress it.
  • New fees for wiring funds.  TD Bank, beginning in December, will charge $15 for cash wired to accounts, said CBS.
  • Higher fees for not meeting a new or higher  minimum balance. Some banks are raising the minimum balance required for a checking account. Many are increasing checking fees by $2 to $3 a month.  BofA charges $12 a month for personal checking. It also has a new menu of checking accounts--with fees of $6 to $25 a month--in some states that it plans to roll out to more states in 2012. And, Citigroup is charging $10 a month, and Chase, $12 a month, said CBS.
To avoid fees, consumers can consolidate all their accounts with the same financial institution; move checking and savings accounts to where they have their mortgage loan; and negotiate a free checking account if they are refinancing. And "take a look at credit unions and community banks, which aren't creating and raising fees," CBS News said.


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