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More Fees for Bank of America Customers

This article was written by in Banking. 10 comments.

Just when you thought it was safe, large national banks are still finding ways to charge customers new fees. Only a few months ago, word of a new $5 monthly fee for debit card users sent Bank of America customers into a frenzy, threatening to move money away from the financial giant. Bank Transfer Day was largely a success, despite the complicated process of switching banks in today’s automated banking environment.

Hundreds of thousands of customers enrolled in credit unions, smaller organizations that are generally more consumer- and community-friendly than national institutions. Fees like Bank of America’s $5 debit card fee hit mainstream news outlets, bringing personal finance into the consciousness of the public once again. Bank of America eventually dropped its proposal for the new fee, but the bank didn’t stop looking for more methods of extracting funds out of its customers.

For the last generation, customers have grown accustomed to free or mostly-free checking and savings. These are considered deposit accounts. Depositing your money with a bank is more beneficial for the bank than for the customer. Doing business with a bank does the company a favor. The institutions should be paying customers for the banks’ benefit of holding the customers’ money. Sometimes banks do pay consumers, through interest on savings accounts, which as most people know have been at pathetic rates for the last few years.

With money on deposit, banks can go out and offer loans to businesses and individuals, earning money on the interest charged on those loans. That’s where banks should make money from their customers. Savings and checking customers are doing banks a favor.

Lately, the problem has been that banks aren’t making as much money from lending as they had previously, and shareholders demand consistently growing profits. That pressure results in even more fees. And banks are now counting on the fact that last year’s outrage has subsided, and the public is now willing to live with the idea that basic banking is not free. Additionally, it’s fair to say that the cost for a bank to manage checking and savings accounts may have increased, due to research and development into technology to provide all the banking conveniences (online access, mobile apps, person-to-person payments, etc.) that consumers have come to expect, although one could argue the lowered reliance on tellers and live customer services representatives should offset that cost.

Furthermore, the latest round of fees are designed to hurt lower income households more than those with higher net worth amounts. It’s been true in investing for a while that the better rates and lower fees are available to those with higher balances. This is due to the attempt to convince customers to invest as much money as possible with any one particular institution or brokerage. The same is true with fees; the more money you have, the more leverage you have to demand lower costs for the services you buy.

This leaves low-income families in a tough spot. If you can’t maintain a minimum balance in your checking account, a monthly fee will reduce that low balance even further, possibly even below zero, so you end up owing money to the bank or the bank decides to close your account. While the balance minimums encourage customers to leave more of their money with one institution, not all customers have more money to deposit.

Here are a few recent examples of how the latest round of new fees from big banks penalize those without the means to deposit more.

  • Some Wells Fargo customers have been subject to a new $15 monthly fee if unable to maintain a $7,500 balance. And they’ve recently changed policies to prevent customers from suing the bank or being part of a class-action lawsuit.
  • Citibank increased its minimum balance to avoid a $20 monthly fee from $6,000 to $15,000.
  • Bank of America is testing new monthly fees of $6 to $25 in three states (Arizona, Georgia and Massachusetts).

At the same time, an informal poll of fans of Consumerism Commentary on Facebook and followers on Twitter indicates most engaged Consumerism Commentary readers, who generally earn more than the average internet user according to basic demographic research, pay nothing for their checking account, though some are still subject to a minimum balance or enrolling in direct deposit to avoid a fee. Finding free checking is still possible, especially with credit unions, but non-students still need to occasionally jump through hoops with major banks.

New regulations are often cited by the financial industry as the trigger for punishing low-income customers for handing their money to banks for safekeeping and lending. Others see these new fees as a way for banks to increase profits while using regulation as a convenient scapegoat. Of course, opinions on the matter are generally divided along political party lines as well as between industry lobbyists and consumer advocacy groups.

Low-income families might continue to avoid the banking industry, which may be the unstated goal of financial institutions in the first place. Unfortunately, that leaves little choice for low socio-economic status communities other than turning to non-bank financial products, like expensive payday loans and check cashing services. Not only do these communities need better financial role models (education alone will never solve the financial literacy problem), but they need to be guided toward better products and services.

There’s a real market opportunity for better products and services, for smart entrepreneurs who are looking to make a difference. In the mean time, here’s how to close your Bank of America savings or checking account when walking into the branch won’t work for you.

Updated June 24, 2016 and originally published March 6, 2012.

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About the author

Luke Landes is the founder of Consumerism Commentary. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about Luke Landes and follow him on Twitter. View all articles by .

{ 10 comments… read them below or add one }

avatar 1 Anonymous

Having direct deposit at Bank of America usually means you will have a free account. It also saves the trip to the bank to cash your check.

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avatar 2 Anonymous

So, so glad I don’t have a checking account with Bank of America anymore. They will not get another cent of my money. Their fees were outrageous and service was horrible.

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avatar 3 qixx

Watch out if you ever get a home mortgage. BofA buys a good amount of mortgages. My in-laws have refinanced their home 3 times. Each with a different company. Each time the mortgage has been purchased by BofA. They don’t like BofA and refinance with a different company to get away from BofA.

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avatar 4 wylerassociate

It is just silly that bank of america hasn’t gotten the message that customers don’t want anymore fees.

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avatar 5 Anonymous

To Who Ever, Bank of America is getting so bad about wanting fees are they that desperate.. What about the Seniors that have automatic deposite of their social security check. Most of us have this done for safety reasons and live on such a fixed income there is no way to keep any money in the bank.. We get paid once a month and bills,groceries and doctors and pharmacies have to be paid and once done we are running short and have to wait for the next check. Only this year were we able to get a very small increase only to have most of it go back to social security for the medicare so where is our break. Everything around us goes up except our checks and nobody gives a darn about it, especially our politicians, they just keep bailing them out. Who will bail us out ?? I know that if the fees are charged on my account I will stop service with them and will take my chances of having my check sent by mail to my home. This is so stupid just keep taking and taking, enough is enough. Take theirs away and see how long they will last living like the normal folks, Thank you Andy

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avatar 6 lynn

I’m sorry you’re having such a difficult time. You can look for a friendlier bank and have your ss check transferred over. Good luck, if you decide to look into this.

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avatar 7 shellye

Andy, have you considered taking your business to a local credit union? Most all of them can handle your direct deposit and provide very thoughtful and friendly service. Good luck!

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avatar 8 shellye

Having an account at any B of A is simply madness.

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avatar 9 Ceecee

Community banks are the way to go!

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avatar 10 Anonymous

Does this suit include loans? I am paying off a loan I got from BOA in 05 or 06. and seems as if the balance is not decreasing very much, I also make additional payments to the principal every month.

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