Updated from 11:08 a.m. ET with statement from Bank of America that says new fee structure will only apply to new deposit accounts. NEW YORK ( TheStreet) -- Let's put on our thinking caps before the inevitable and tiresome outcry against Bank of America's ( BAC) coming deposit service and fee changes. The Wall Street Journal on Thursday reported that Bank of America was "working on sweeping changes that 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."
A Bank of America spokesperson says that "there is nothing new in the Wall Street Journal article," since the company had previously disclosed the "new solutions we are testing in Massachusetts, Arizona and Georgia, and all of them offer ways to avoid monthly maintenance fees. If customers do their basic banking online or via ATM, there are no fees." The spokesperson confirms that a customer who only has a checking account with Bank of America, can avoid all service fees by switching over to electronic banking, which includes free electronic bill paying. The company later provided additional detail, calling media reports of new fees for existing customers "inaccurate," and saying "Bank of America is not planning to increase checking account fees with our existing customers." In a statement, the company added that "since January 2011, Bank of America has been testing checking account options for new accounts only, in Arizona, Georgia and Massachusetts," and that BAC "is continuing to learn from those tests and has not made any decisions about when, how, or if we would change our fees on new accounts." Bank of America's plan last year to institute a $5 monthly fee for the privilege of using a debit card was not well thought out, and after a predictable outcry, the company backed off. This time it's different, and the company has no choice. The recent political and regulatory curbs on deposit account service charges began on Aug. 15, 2010, when the Federal Reserve implemented new rules requiring banks only to provide expensive ATM and debit card overdraft protection for customers who previously signed up for the service. The first full quarter of operations under the new rule was the fourth quarter of 2010, when Bank of America's service charges on deposits accounts dropped 36% from a year earlier, to $$1.3 billion, according to HighlineFI.
The company in November settled a class action suit over maximizing overdrafts by processing the largest transactions first on a daily basis, by agreeing to pay $410 million to 13.2 million customers whose debit card overdraft fees had been maximized, when the bank processed larger transactions first. The latest megahit on fee revenue was the Federal Reserve's clampdown on the interchange fees large banks charge merchants to process debit card purchases, as required by the Durbin Amendment to the Dodd-Frank Wall Street Reform and Consumer Protection Act.
- JPMorgan Chase's (JPM) service charges during the fourth quarter of 2010 -- the first full quarter under the requirement that customers sign up for ATM and debit card overdraft protection in advance -- totaled $1.1 billion, declining 18% from a year earlier. The company said in its annual 10-K filing on Tuesday that "as a result of the Durbin Amendment, its annualized net income may be reduced by approximately $600 million per year."
- For Wells Fargo (WFC), fourth-quarter 2010 service charges on deposit accounts totaled $1.0 billion, declining 27% from a year earlier. The company said during the fourth quarter of 2011, it saw a "$365 million decline in debit interchange fees."
- For Citigroup (C), which has a much smaller U.S. deposit base than the other "big four" club members, fourth-quarter 2010 service charges on deposit accounts actually increased 1% year-over-year, to $158 million. The company said during the fourth quarter of 2011, main subsidiary Citicorp saw a slight year-over-year increase in retail banking revenue, to $4.1 billion.
The benefits of electronic banking.Switching over to electronic banking is a winning proposition for all parties:
- With electronic banking, it is very easy to keep track of your records. In this day and age, a three-ring binder of bank statements seems a little dated, and it takes up a lot of room, and Murphy's Law indicates that the key statement you need, will be missing.
- With electronic bill paying, you save on postage, you avoid manually writing checks, filling out a check register, etc., and avoid check printing fees. It's also easy to pull up records to prove payments have been made.
- You avoid a monthly service charge.
- The bank's costs are reduced, since they no longer have to buy paper and envelopes, print and send expensive monthly statements.