Is Your Bank Killing Free Checking?

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Wells FargoIntense customer backlash over new bank fees has led some big financial institutions to backpedal on them in recent months, but at least one is ushering in new charges guaranteed to be unpopular with customers.

Wells Fargo (WFC) stopped offering free checking to new customers in 2010: Now, it's introducing a $7 monthly charge in six (thus far, unidentified) states for customers who had opened free checking accounts before the cutoff.
The new fees will kick in May 4.

There are ways around the fee. Customers who maintain a minimum daily balance of $1,500 or have direct deposits of $500 or more going into their accounts each month won't be hit with the $7 fee. If a customer below those thresholds is willing to receive online statements instead of monthly mailings, the $7 monthly charge will be reduced to $5.

The ultimate avoidance mechanism, of course, is to leave your bank if it introduces new fees. However, this is a copycat industry. If a major institution is making money in a new way, you can be sure that rivals will follow.

Debit Card Fees Revisited

Banks' fee hunger is a theme that is becoming all too familiar: Bank of America (BAC) and several other financial giants tried to introduce a monthly $5 fee to account holders who use their debit cards for purchases late last year. After a groundswell of public displeasure, Bank of America ultimately had to nix the notorious charge before it officially kicked in.

It probably didn't help that Bank of America is often seen as TARP's poster child, and taxpayers found it easy to turn on the company they'd bailed out two years earlier. Wells Fargo took a bit more than half as much in federal cash as Bank of America did at the time, though both companies went on to repay the loans.

The Customer Is Eventually Right

These are challenging times for banks. Regulators have tightened their lending standards, limiting the financing heart of banking. Interest rates are also virtually zero for savers. Interest-bearing accounts and short-term CDs yield practically nothing.

Banks have resorted to sector consolidation, snapping up smaller players to improve their cost structures. That clearly isn't enough, and in this climate some of the banking institutions feel that their only option is to milk more revenue out of their customers.

As long as the clients stick around, why change?

"Our customers' voices are most important to us," Bank of America announced in last year's decision to reverse the debit card fees. "As a result, we are not currently charging the fee and will not be moving forward with any additional plans to do so."

Unless Wells Fargo customers speak up loudly, this new fee is going to stick. Look for the protests to start around the time that the six states to be affected are actually identified.

Longtime Motley Fool contributor Rick Munarriz does not own shares in any of the stocks in this article. The Motley Fool owns shares of Bank of America and Wells Fargo. The Fool owns shares of and has created a covered strangle position in Wells Fargo.



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nthereoff

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March 12 2012 at 7:41 PM Report abuse rate up rate down Reply
stocksnfossils

Banks are for profit businesses, not a government agency. They lose money on small accounts. Preventing banks from charging for the costs of providing a service Is Socialism. Big or small, a company needs to have the right to charge for its services. How would you like if the government came into your company and told you to provide a money losing service to a large number of people at no charge?

March 12 2012 at 4:41 AM Report abuse rate up rate down Reply
1 reply to stocksnfossils's comment
hntrfmhades

what right IS that? They have no 'right' except to charge fees that are agreeable WITH the customer at the point of 1st signing up for services. If they want to renegotiate the contract, they can request a meeting, and negotiate a new contract, as th customer should be able to. One of the options would be for the customer to be allowed to transfer his/her account(s) to another bank(etc) at no charge with the bank absorbing all costs (in the case where THEY want to add fees and/or change services. By the way, the government under the present administration does just that with the Obamaism/communism/socialism approach to business and entitlements, or at least consistently tries to. (refer to birth control/contraception please)

March 12 2012 at 6:45 AM Report abuse rate up rate down Reply
Whirlpooloff

If you can't keep $1,500 in your account, why do you need a bank? A mattress or cookie jar will do fine.

Most financial advisors suggest maintaining emergency funds of three to six months of expenses. My monthly expenses are $3,000. $1,500 represents about two weeks. Big deal.

March 11 2012 at 8:52 AM Report abuse rate up rate down Reply
Whirlpooloff

If you can't keep $1,500 in your account, why do you need a bank? A mattress or cookie jar will do fine.

Most financial advisors suggest maintaining emergency funds of three to six months of expenses. My monthly expenses are $3,000. $1,500 represents about two weeks. Big deal.

March 11 2012 at 8:51 AM Report abuse rate up rate down Reply
Bob

It would be interesting to find out what percentage of customers keep over $1500 in their account,,,, most? a few,,, half?

March 10 2012 at 4:05 PM Report abuse +1 rate up rate down Reply
bobkatt5

I noticed that in 2011 my average balance of $15k in my credit union netted me a cool $1.27 (not a typo) in interest for the year. I immediately began researching another financial institution to do business with only to discover that ALL financial institutions are guilty of one one hundredth of a perccent interest rates on savings accounts. Well conservatives, welcome to deregulated banking.

March 10 2012 at 3:31 PM Report abuse rate up rate down Reply
1 reply to bobkatt5's comment
Regular American

No, more like welcome to free money from Bernanke. They are the ones that have rates so low for us savers. It has almost nothing to do with the banks.

March 11 2012 at 12:46 AM Report abuse rate up rate down Reply
kbbaldwin

"If a major institution is making money in a new way" then the obvious move is to go to a non-major institution. A local or regional bank or credit union will offer great customer service and charge a lot less for it. If you are still banking with one of the monster megabanks, then you deserve to pay the fees. You can callthe fees a non-deductible tax on the fiscally illiterate.

March 10 2012 at 2:24 PM Report abuse rate up rate down Reply
pbc444

CU's are NOT all that immune from drafting NEW FEES...Have had free checking for over 40yrs,savings as well but recently recvd BILLING CHARGE in regards to SAVINGS if NOT maintaining a minimum deposit on record of at least $200 dollars each month. Another FEE was interbank deposits which HAD BEEN NO COST and now subject to $7+ per transactions. I DID complain and was told that due to 'grandfathered' account status would NOT have minimum balance fee imposed. I do NOW PAY for checks where prior were free as well.
Just be aware that ALL are attempting to find NEW FEE CHARGES thou CU's still a more affordable option for the PRESENT time overall !!

Also irritated with the various who CHARGE a fee for ONLINE PAYMENT ...such as utilities (wireless transactions which are PROGRAMMED. Verizon and UTILITY companies as well as insurance comanies who SERVICE FEE for such transactions. Meanwhile, OUR USPO is going broke and we ALL will be in further dire straits as it continues its dissapation/dissapearance and higher fees which presently are far more a bargain than obviouslky too many fail to realize !!

March 10 2012 at 2:18 PM Report abuse rate up rate down Reply
wharna

I live in Broward county FL but my Wells Fargo Free Checking Account was opened and is still considered a New Jersey account. Last week at the teller window here in FL the teller informed me that in a few months my checking account will no longer be offered and I will be incuring additional monthly fees if I do not go over to speak to a customer service person to see about changing my account. So I know that NJ will be one of the states that will be charging. and I will be switching banks very soon.

March 10 2012 at 2:14 PM Report abuse rate up rate down Reply
wharna

I live in Broward county FL but my Wells Fargo Free Checking Account was opened and is still considered a New Jersey account. Last week at the teller window here in FL the teller informed me that in a few months my checking account will no longer be offered and I will be incuring additional monthly fees if I do not go over to speak to a customer service person to see about changing my account. So I know that NJ will be one of the states that will be charging. and I will be switching banks very soon.

March 10 2012 at 2:14 PM Report abuse rate up rate down Reply