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Friday, June 18, 2010

Totally Free Checking Going Away

Bank of America may lead the banking revolution away from totally free checking.

Bank of America Corp. and its rivals are moving away from free checking accounts as they grapple with losing millions in fee revenue from new regulations on overdrafts.

BofA is quietly testing new pricing plans on checking accounts nationwide, The Wall Street Journal reported Thursday. The newspaper said the Charlotte-based bank

(NYSE:BAC), which ranks fifth in Raleigh-Durham market share, is considering tiered pricing plans that encourage customers to do more business with BofA to avoid charges, rather than imposing flat monthly fees for all.

Overdraft fees were touted by the administration as one part of their crackdown on banks.

Banks will have to secure their customers' consent before charging large overdraft fees on ATM and debit card transactions, according to a new rule announced Thursday by the Federal Reserve.

The rule responds to complaints from consumer groups, members of Congress and other regulators that the overdraft fees are unfair because many people assume they can't spend more on a debit card than is available in their account. Instead, many banks allow the transactions to go through, then charge fees of up to $25 to $35.

For small purchases, such as a cup of coffee, the penalty can far exceed the actual cost of the transaction.

Of course, ironically enough, this was part of a populist push to take on the banks on behalf of the middle class. Totally free checking has become a staple among all the major banks for the last decade. If that goes away, that's a fee on everyone that has a checking account (though the plan is to only charge those with only a checking account and waive fees on this with multiple accounts) That would bring pain to far more of the middle class. That appears to be the end result of yet another regulation.


AG said...

Credit Union, FTW. At least mine doesn't charge me for incoming wire transfers like Chase does.

xformed said...

What is interesting is how the left leaning people, when you say "Great! Regulations that will cause a loss for the customers!", just say "Hey! Go to a credit union!"

No recognition that the laws/regulations are a proximate cause of sending customers elsewhere (like credit unions (which I have used for decades), with not the slightest recognition of how it will cause the bansk toi have to charge more to those who stay, and then they will go, and guess what? Then the banks will need more money to stay afloat...too big to fail has already set a precedent. The simplistic lawyerly, let's punish those evil banks will end up punishing them, and us, to the detriment of the current economic crisis. The history books now show that FDR's policy actually forced the extension of the Depression, not shorten it. I fear that's what's happening now.

We need seriuous minded, experienced people, and some smart "outsiders" to see if there are better ways, in a room, with their sleeves rolled up, and a mission to get things on track, not how many people we can increase the pain on.

So, AG, nice answer, if you want the banks to close.

What other industry will go next? It's not a strong pattern of taking over, injecting regulation, then telling the taken overs to shut up and deal with it...this method will not serve any of us well in the long run.

Anonymous said...

While it's true that many large banks are exploring new financial avenues, free checking is still available at some community banks. Free-checking and other free services are still being offered.