Bank of America appears poised to ignite the wrath of its customer base once again by introducing a new fee structure for basic checking accounts. The company is readying changes that will require users of basic checking accounts to pay a monthly fee, The Wall Street Journal has reported. If the customers agreed to bank online or, buy more products, or maintain a certain balance, the fee may be waived.
The bank is reportedly already testing pilot projects for fees in the range of US$9 to $25 in three states.
Bank of America did not respond to our request to comment for this story.
Bank of America is not alone in considering new fees. Other institutions, notably Chase, have also floated or are in the processing of experimenting with revamped fee structures.
A Steady Uptick
It is not as though fees for checking accounts have remained stagnant all these years. Basic checking accounts cost about 21 percent more now than they did six years ago, according to a new report from Javelin Strategy.
However, the fees being discussed appear to be more than just a one-percentage point-here, one-percentage point-there increase.
Also, six years ago banks were in relatively good standing with the public. One Great Recession later, consumers have little patience with fees of any kind.
A Lesson Learned?
One would have thought that Bank of America, at least, learned a lesson last fall when it tried to levy a $5 monthly fee on customers who used their debit cards to purchase goods. An outcry ensued, and the bank quickly backed off.
This time around, Bank of America is determined to see the plan through, the Journal said, in large part to pay for new financial regulations mandated under the Dodd-Frank Act.
Indeed, banking regulations such as the Dodd-Frank reform are prompting banks to increase fees or deliver fewer services, said Albert Lu, managing director and chief portfolio manager of WB Advisors.
“JP Morgan Chase recently said about 70 percent of customers with less than $100,000 in deposits and investments will be unprofitable following regulations that cap lenders’ fees,” he told CRM Buyer.
In some ways, banks don’t have to worry about annoying customers with the fees, he added, as some will be driven out of the system entirely by the fees.
“These consumers will rely instead on check-cashing services and payday lenders,” he said.
A Stupid Move
More customers than just the bottom rung will be aggrieved by the move, though, said John Tschohl, president of The Service Quality Institute.
“All banks need to realize that this is the age of the customer,” he told CRM Buyer. “Customers today don’t just sit around; they vote with their money. All banks essentially offer the same service, but quality service is what separates you from the competition.”
Customers will flee to smaller community banks and credit unions that are more customer-centric, Tschohl predicted. Certainly these institutions didn’t hesitate to take advantage of the social media uproar that occurred when Bank of America put in place its $5 fee. Applications for these accounts reportedly surged.
“Service is crucial to the banking industry because bad publicity can spread like wildfire in this digital age,” Tschohl said. “The news of bank fees went viral overnight and Bank of America and others got killed on Facebook and Twitter.”