What Free Checking? Bank of America Adds Fees for Basic Banking Services

Bank os America is adding a $8.95-per-month fee to Free checking as we know it is ending.

The days when you could walk into a bank branch and open an account with no charges and no strings attached appear to be over. Now you have to jump through some hoops - keep a high balance, use direct deposit or swipe your debit card several times a month.

One new account at Bank of America (BAC) charges $8.95 per month if you want to bank with a teller or get a paper statement.

Almost all of the largest U.S. banks are either already making free checking much more difficult to get or expected to do so soon, with fees on even basic banking services.

It's happening because a raft of new laws enacted in the past year, including the financial overhaul package, have led to an acute shrinking of revenue for the banks. So they are scraping together money however they can.

No More Free Checking

Bank of America, which does business with half the households in America, announced a dramatic shift Tuesday in how it does business with customers. One key change: Free checking, a mainstay of American banking in recent years, will be nearly unheard of.

"I've seen more regulation in last 30 months than in last 30 years," said Robert Hammer, CEO of RK Hammer, a bank advisory firm. "The bottom line for banks is shifting enormously, swiftly and deeply, and they're not going to sit by twiddling their thumbs. They're going to change."

In the last year, lawmakers in Washington have passed a range of new laws aimed at protecting bank customers from harsh fees, like the $35 charged to some Bank of America customers who overdrafted their account by buying something small like a Starbucks latte.

These and other fees were extremely lucrative. According to financial services firm Sandler O'Neill, they made up 12% of Bank of America's revenue. On Tuesday, the bank took a $10.4 billion charge to its third-quarter earnings because the new regulations limit fees the bank can collect when retailers accept debit cards.

Checking Accounts Were Never Really Free

Bank of America CEO Brian Moynihan acknowledged in a conference call that overdraft fees were generating a lot of income. But the bank was also losing customers who were often taken aback by the high hidden fees.

Checking accounts were being closed at an annual rate of 18%, he said, and complaints were at an all-time high.

So Moynihan ended overdraft charges on small debit card transactions. He says the rate of account closings have since dropped 27%.

To make up for lost fees, he also started thinking of new products. In August, the bank introduced a new "eBanking" account, where customers were offered a free checking account if they banked online. The catch: If they opt for paper statements, or want access to tellers for basic transactions, they would be charged a monthly fee of $8.95.

"Customers never had free checking accounts," Bank of America spokeswoman Anne Pace said. "They always paid for it in other ways, sometimes with penalty fees."

Overdraft Fee Takes Another Form

This summer, Bank of America also started offering "emergency cash" for a $35 fee to customers who went to the ATM for withdrawals that would exceed their bank balance. Moynihan said 50% of these customers opted to go ahead with the fee.

"We are now in an era where consumers will be buying products from banks, even if it's a checking account," said Brian Riley, senior research director for bank card practice at consultant TowerGroup. He noted that several banks have started charging $7.50 for paper statements.

"Paper and print costs around $2.25, add postage to that, and if banks are losing income from other avenues, someone has to pay for it," said Riley.

Economic research firm Moebs Services says free checking usage has been steadily rising in recent years before falling this year. Last year 81.5% of U.S. banking customers had free checking, but that fell to 72.5% this year.

Large banks are also under additional pressure because of curbs from new laws on high-risk trades with complex derivatives. Their trading desks have been large revenue and profit generators for banks in recent years.

Michael Moebs, the founder of Moebs Services, said it is now up to the smaller Main Street banks to see an opening and grab customers from the big banks.

"Free checking could become a mainstay of community banks and credit unions in the future," Moebs said.


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MY LORD

For all of those who think banks are obligated to "work" with people, ( whihc means take less than what was agreed upon)....will you be willing to " work" with your employer and take less money in your pay check???

October 20 2010 at 7:26 PM Report abuse +1 rate up rate down Reply
MY LORD

The banks arent robbing anyone by taking the Stimulus money. The politicians ( Democrats)are robbing us by giving ther banks the STimulus money....and also giving it to unions etc

October 20 2010 at 7:23 PM Report abuse +1 rate up rate down Reply
MY LORD

Thank Obama for the banks having to resort to this

October 20 2010 at 7:19 PM Report abuse +1 rate up rate down Reply
pllove49

Unreal darn greed every where and trying to keep or put many people in poor house...

October 20 2010 at 3:31 PM Report abuse -1 rate up rate down Reply
mbr9919268

I know of about 7 people now that they ARE FORCLOSING ON AND THESE PEOPLE AREN'T BEHIND ON THEIR MORTGAGES!!!!!!!!! THEY ARE TAKING HOMES AWAY AND FORCLOSING ILLEGALY!!!!!!!!!THIS IS WHAT OBAMBO HAS CAUSED WITH HIS STUPID LOOP HOLES WITH THESE BIG BAILED BANK! YOU WOULD HAVE THOUGHT HE KNEW WHAT HE WAS DOING BEING HE'S AN ATTORNEY!!!!!!LOL!!! MONEY IN HIS POCKETS... THIS IS WHAT WE ARE GETTING BECAUSE OF A HAND FULL OF CROOKED ATTORNEY'S RUNNING OUR COUNTRY AND WHITE HOUSE NOV.2ND CAN'T COME HERE SOON ENOUGH!!!!!!!

October 20 2010 at 11:51 AM Report abuse +1 rate up rate down Reply
oyevette

I have a great idea....MAYBE THE BANKS SHOULD LOAN MONEY TO SMALL BUSINESSES. STOP ROBBING THE AMERICAN PUBLIC BY TAKING STIMULUS MONEY AND INSTEAD OF LOANING THE MONEY TO SMALL BUSINESSES, GIVING BONUSES TO EXECUTIVES (CROOKS). What goes around banks. Unfortunately, the rest of the American public is affected by this. On top of this, derivitives continue to this very day. Banking, energy and insurance are oligopolies. AREN'T THERE LAWS PROTECTING U.S. CITIZENS AGAINST ALL OF THIS? Of course there are. Unfortunately, corruption reigns supreme. Our nation will not rebound until we become more honest and less greedy as a society.

October 20 2010 at 11:44 AM Report abuse +2 rate up rate down Reply
jprin30571

I have 2 bank accounts. My first is with my local bank - no fees and I get interest (very little mind you but it's something) on my savings no matter what the balance. The only problem I had with them was my debit card which had a .20 cent transaction fee. So I opened another account at Capital One who dosen't charge me checking fees and I don't get charged to use my debit card. I don't understand why people stay with banks who charge you fees for checking and other services! Move on people, send a message, it's your money - they're providing a service for YOU!

October 20 2010 at 11:31 AM Report abuse +2 rate up rate down Reply
cod40

Bank of America are a bunch of greedy mothers. They forclose on people without any kind of "trying" to work with people. Now they end free checking. I really cant understand why people do business with them. I would pull my money out of their establisment!!

October 20 2010 at 11:25 AM Report abuse +5 rate up rate down Reply
ThinkUp70

Americans have been snuckered in for years with the perception that big, monopolized, banks were better to deal with than a small, local, and friendly bank. It's good to find out that everyone is wising up to the boa constrictor, squeezing the life out of our citizens, and swallowing all of America's resources. Hurray to the "smaller" community banks of America!

October 20 2010 at 11:16 AM Report abuse +3 rate up rate down Reply
trredredwine1

i stopped using a bank along time ago,after the out rages fee on overdraft. if you were like $1.00 off they'd charge you. so i am with a federal credit union and love it. been with them for 10 years.

October 20 2010 at 10:55 AM Report abuse +6 rate up rate down Reply