Rising Bank Fees: A Perfect Storm for Consumers

Strategic Insights -

Consumers are facing a perfect storm of increasing bank fees, hurt by a weak economy, troubled financial markets, and low interest-rate yields. Despite Bank of America canceling its planned $5-a-month debit card fee, banks continue to rise fees, leaving consumers with fewer options and higher costs. As consumers become increasingly frustrated, it's essential to be proactive in managing bank fees and exploring alternative options.

Key Takeaways:

  • The proposed debit-card fee by Bank of America in 2011 sparked a wave of protests, but banks have continued to raise fees.
  • Consumers can still find some credit unions, community banks, and online banks offering free checking and lower fees by doing their homework.
  • Carefully reading bank notices and contacting the bank can help avoid or waive fees, especially if consumers have large balances or other relationships with the bank.
  • Bank overdraft fees remain high, with a recent survey by the Consumer Federation of America finding fees ranging from $33 to $37 at the 14 largest banks.
  • Two-thirds of banks add multiple fees if consumers do not repay overdrafts promptly, resulting in costly consequences.
  • Consumers should shop around for better fees and be aware that banks may not list all fees on their website.
  • Protest and let banks know consumer dissatisfaction, as they test the market to see if consumers will accept higher fees.
  • Banks are raising fees across the board to improve their balance sheets, but consumers should beware of follow-the-leader fee increases.

Statistics:

  • The Consumer Federation of America's recent survey found bank overdraft fees at 14 largest banks ranging from $33 to $37.
  • Two-thirds of banks add second and multiple fees if consumers do not repay overdrafts promptly.
  • Bank fees have been in line with inflation for over a decade.
  • 15-year trend of increasing bank fees accelerated in the past year due to regulatory changes.
  • Bank of America's proposed debit card fee was canceled amid consumer protests.

Sources:

  • "Batten down the hatches: Bank fees have been rising for a number of years, but the 'perfect storm' of a weak economy, troubled financial markets and low interest-rate yields produced the 2011 hurricane." - Andrew Leckey, andrewinv@aol.com
  • A recent survey by the Consumer Federation of America found bank overdraft fees at the 14 largest banks ranging from $33 to $37.
  • According to Jean Ann Fox, director of financial services for Consumer Federation of America in Washington, "Consumers can shop around for better fees but need to be careful because it is not as easy as going on a bank's website to get its fee listings."
  • Pamela Banks, senior policy counsel for Consumers Union in Washington, stated that "Banks are definitely scrambling around to try to find ways to make up for their lost revenue."
  • Greg McBride, senior financial analyst at Bankrate.com in North Palm Beach, Fla, said "Increases in bank fees have been a continuing trend for at least 15 years, but they kicked into overdrive in the past year due to regulatory changes."