A July report by the Federal Deposit Insurance Corporation showed that banks took in $38.6 billion in fees and service charges last year. This may not sound like much when some of the richest individuals in the world have that much under their control. But let’s put this number in perspective by comparison.
- The federal budget deficit is currently $168 billion. This deficit was created over the past eight years and is projected to be about $407 billion by the end of 2008. That’s an average accrual of $50.87 billion per year. So banks collect consumer service fees almost as fast as the government created the current federal deficit.
- Microsoft projects to earn about $40 billion in profit after operating expenses from June 2008 to July 2009. So the banks could collectively purchase almost all of the products to be sold by Microsoft next year using the amount they collect in customer fees in 2007.
- Banks will collect more in consumer fees from their American customers than the average annual Gross Domestic Product (GDP) of many countries including Syria, Kenya, Sri-Lanka, Tunisia, Panama, Jordan and even oil rich Qatar.
I could go on but I’m not. If anyone still thinks that consumer bank fees are not hurting this economy as a whole they’re living in denial. The big question is: What, if anything are banking consumers getting for this money? You’re providing the banks a reason to exist so they can continue to do what? Protect the money? The money that only exists in a virtual world of electronic transaction systems? I really hope China doesn’t ever follow the lead of the US and give up their cash and carry culture in exchange for a nation of consumer debt and fees for the banks. No, I won’t even wish that on our biggest economic threat.
I don’t pay any bank fees. I guess I’m either a very smart shopper or have a very good bank. I do pay interest on my credit card balance, but I don’t consider that a fee…that is a charge for a service provided. My online banking is free, my checking account is free, when I use my debit card that is free, and I make sure I have money in my account BEFORE I spend it, so I don’t pay any NSF fees either. If we, as a nation, are giving banks that much money in fees alone, then we are getting what we deserve. There are ways to avoid them and I would suggest that the consumers contributing to this massive problem use the grassroots approach, talk to a representative from your bank, and STOP THE INSANITY!!
Do you ever use an out of network ATM? That’s $3 now. Only way to avoid it is to use an ATM only at a branch of your own bank. Pretty hard to do when traveling.
Also, there’s a fee when a bank cashes a check drawn on that bank by non account holders. I’ve paid the $5 fee to do this many times because I wasn’t sure the check was good. Twice the checks I presented were not. If I deposited those into my own account I would have been charged $34 for each returned check. This is not an overdraft fee or a NSF fee, it’s a punishment against my account for someone else giving me a bad check. Better to pay the $5 up front to be certain. Either way they get you coming or going.
Soon there will be almost no transaction that can be performed in some Bank of America branches because they are set to impose the highly controversial “teller fee” where simply approaching a teller to complete a transaction will cost $2.00. Other banks will follow suit.
There motive is simple and no big secret even though they won’t publicly admit it: They want to increase revenue while reducing expenses. This means reducing the number of face to face or human transactions, in short a reduction in personal customer service. The way to do this is to force consumers to use the bank the way the bank wants, not what’s best for the customer.
Yes there are ways to avoid the fees as long as the consumers conform to the transaction policies that cost the least for the banks to conduct including debit cards, ATM deposits, direct deposit and no out-of-network transactions. Notice there’s never a human involved in their preferred transaction methods.
Banks would love nothing more than for the annoying paper checks, counter teller and customer service and components of the industry to go away. It’s costing them money when they know full well they can automate the whole process and still generate revenue on merchant transaction processing fees, NSF fees etc. What I hate is the fact that they won’t admit it.
Instead of stating up front “We’re cutting back on customer service and requiring direct deposit because it’s more profitable” they make it out to be more beneficial for the consumer with statements like “reduced hold times” and “convenience”.
Some people who agree with me believe the banks are biting the hand that feeds them and think that if they reduce customer service too much they will “lose their customers”. Ha! That’s laughable. The banking industry is a systematic institution no one can escape from until there are more consumer transaction processing services available such as credit unions.
They’ve set up a system under the pretense that every “responsible citizen” is required to participate in and each must play by the banks rules. The rules which change almost monthly now to maximize revenue off new fees that can be introduced even with questionable legality.
Dr. Willis Martin, the founder of Martin Innovations in Rocky Mount, put it best the other day as I overheard him end a conversation and hang up the phone when he said “The bank is not your friend son”. Wow – he had just met me and it’s like he’s known me for the past five years. Word is catching on. It’s now us against them. With the credit crisis and continual fee increases consumer confidence in the banking industry is not eroding, it’s already gone.
I agree with Anna. I bank at a paperless bank. Yes, I can write checks but never write one when I have non suffient funds. I have never paid any bank fees. If I need cash, I plan ahead and get the cash that I need out of an ATM that does not charge me a fee or I use my debit card which costs me nothing. I hate checks and I hate receiving checks because I have to go the bank which I visit as little as possible. (I believe maybe 3 times this year). I also have an overdraft fund which I can use if for some reason I have not transferred enough money into my checking account. I pay that back right away. Banks make money on loans and they have been too generous in giving these out to people. When things were profitable in the “90s”, the banks were giving out loans that were 3 times as much as the consumer could afford. It was an interest only loan for awhile. Then, when the rates went up, people could not pay the loan or mortgage. Banks as well as consumers were at fault. Now, you don’t need to use a bank for your money. You can just pay with cash or get a money order. RIGHT! How time consuming would that be! HA!