My followers have voted. They are not interested in old Oscar winning movies. Readership way down. So this weeks theme has been terminated effective immediately. Real time feedback is a great thing 🙂
What they like is controversial and innovative blogs. So today we cover one of the industries that really challenge our patience and test our emotional stability. The banking industry. My friend Gina works in this industry, so I would like to apologize in advance to her for any perspective that I might provide that conflicts with her thoughts or her commitment. It is not personal Gina, it is just business.
A few months ago our friends at Bank of America decided that they wanted to charge us $5 per transaction to use our debit cards. This blog covered the topic at that time and the next day the decision was overturned. Could your outrage have stopped this insanity? Yes, you are the ones that stopped the madness.
So now a few months have passed and the folks at Bank of America are at the drawing board again, figuring out new ways to nickle and dime their customers to make up for the $26 billion in lost revenue over the last two years. The latest round of proposed changes would require many users of basic checking accounts to pay a monthly fee unless they agree to bank online, buy more products or maintain certain balances.
Tough to make money the way the banks once did as the banking industry right now is suffering from low interest rates, slow economic growth and new rules limiting many types of service charges. Many other big banks, including J.P. Morgan Chase & Co.—the nation’s largest—and Wells Fargo & Co., have rolled out plans that aim to raise fee revenue or push customers to do more business with the bank. So, Mr. & Mrs. Consumer, it is “Sock it to Me” time.
Pilot programs in Arizona, Georgia and Massachusetts have experimented with charging $6 to $9 a month for an “Essentials” account. Other account options being tested in those states carry monthly charges of $9, $12, $15 and $25 but give customers opportunities to avoid the payments by maintaining minimum balances, using a credit card or taking a mortgage with Bank of America. People close to the bank said Chief Executive Brian Moynihan is determined to plow ahead.
Will the bank with more than 55 million U.S. households as customers, stick with its initial idea for a basic flat-fee checking account that doesn’t offer a way to avoid paying a charge? That scenario is considered less likely than telling checking-account customers they will face a new fee unless they go online or take other steps outlined by the bank. Banks often lose money on accounts like basic checking that they use in part to lure younger customers. They offer the accounts in part because they hope to retain customers as they grow more affluent and use services such as mortgage and business loans and credit cards.
So as consumers, we can take action; we can rebel again and see if we can stop it; we can change banks and move our accounts to smaller, community banks. In the short term this works. But here is the issue. Smaller banks are trying to get bigger. Once they get big enough in any given region, they become a threat to the large banks. The large banks then buy the smaller banks, executive and stockholders get big paydays and then they have to pay the debt for the purchase, the synergies they expected to get do not materialize and they figure out ways to raise their fees again. This is a very vicious cycle that never ends, so welcome to groundhog day. You have read this story before – this one just has a new date on the article.