Bank mailed me letter, $5 fee starts in June

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Re: Bank mailed me letter, $5 fee starts in June, criminal.

Postby Jazztonight » Tue Apr 30, 2013 12:48 pm

Has anyone mentioned that if you want a safe deposit box, the bank requires a balance?

We wanted our safe deposit box near our home, and that's not where we bank (we use a credit union that doesn't have safe deposit boxes).

We deposited $500 in a savings account, and just consider the paltry interest lost an add-on to the yearly fee charged for the box.

nickle and dimed again!
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Re: Bank mailed me letter, $5 fee starts in June, criminal.

Postby Clearly_Irrational » Tue Apr 30, 2013 12:52 pm

crowd79 wrote:So you think it's ok for banks to charge people to borrow their money? This is just another way for banks to increase their profits at the expense of the little guy.


Welcome to capitalism. Frankly, I'm surprised it took them this long. Deposits, especially ones this small are not a big moneymaker for banks especially in a low interest rate enivronment.
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Re: Bank mailed me letter, $5 fee starts in June, criminal.

Postby FabLab » Tue Apr 30, 2013 1:00 pm

winglessangel31 wrote:
bUU wrote:I do think a lot of American consumers grossly over-value their own patronage, and not just as bank depositors.

Bingo. All that "the customer is always right" attitude. :sharebeer
if you still consider yourself in the right(?).


Don't know so much about that, but a sense of perspective on the OP's part might be useful.

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Re: Bank mailed me letter, $5 fee starts in June, criminal.

Postby Retread » Tue Apr 30, 2013 1:10 pm

crowd79 wrote:Banks profit on the difference of the interest they pay me and turning around and lending that money to someone else. I don't care if it's $1 million or $50. To say that the bank makes nothing off of consumers with small balances is wrong.

Are you just pulling all of our legs, or do you really believe this? I spent my career in banking and I can tell you there is no profit in a $300 checking account. Those are the customers that consume a lot of time with problems in their accounts, write a lot of small checks, overdraw the account and use few other services. The bank is only willing to give you the deal you have because they hope you will use their credit card, installment loans and similar services. What makes you think the banks should provide this service for free when no other business gives you free service?
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Re: Bank mailed me letter, $5 fee starts in June, criminal.

Postby KyleAAA » Tue Apr 30, 2013 1:19 pm

crowd79 wrote:Banks profit on the difference of the interest they pay me and turning around and lending that money to someone else. I don't care if it's $1 million or $50. To say that the bank makes nothing off of consumers with small balances is wrong.


Here's an honest question: how much do you think it costs the bank to maintain your account? It's obviously not $0. What do you think the number is? Additionally, how much revenue do you think they generate from your $300 balance on a monthly basis? Do you think the second number is larger than the first? It almost certainly is NOT, in my estimation. You are costing the bank money. They aren't making any profit whatsoever on your $300 balance. Do you work in banking or do you have any professional experience with banking?
Last edited by KyleAAA on Tue Apr 30, 2013 1:20 pm, edited 1 time in total.
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Re: Bank mailed me letter, $5 fee starts in June, criminal.

Postby mmmodem » Tue Apr 30, 2013 1:20 pm

I had a bank that I went to for over a decade. They reduced the savings account interest to 0.01%. I stayed with the bank. Then, they started a $1500 minimum balance fee. I stayed with the bank. Then I got hit with a $9 service fee when I dipped below $1500 for 1 day. Ledger balance means you can never go below the minimum. I pulled too much money out of ATM and replaced immediately but it didn't matter, damage was done. I called in to have the charges reversed which they gladly did.

I opened up an account with a large national credit union with no fees. It is a free basic no fee checking account with first checkbook free. Yeah, they still exist. The nearest Alliant branch is 30 miles away from me but I never have to step into it because I use mobile deposits. I'd like to have a closer bank but their interest checking account rates are 65x the savings rate at my other bank make up for it.

I totally understand why my old bank had to impose fees. It's not criminal. It's economics. They should have no problem with me leaving for the same reason.
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Re: Bank mailed me letter, $5 fee starts in June, criminal.

Postby crowd79 » Tue Apr 30, 2013 1:21 pm

Retread wrote:
crowd79 wrote:Banks profit on the difference of the interest they pay me and turning around and lending that money to someone else. I don't care if it's $1 million or $50. To say that the bank makes nothing off of consumers with small balances is wrong.

Are you just pulling all of our legs, or do you really believe this? I spent my career in banking and I can tell you there is no profit in a $300 checking account. Those are the customers that consume a lot of time with problems in their accounts, write a lot of small checks, overdraw the account and use few other services. The bank is only willing to give you the deal you have because they hope you will use their credit card, installment loans and similar services. What makes you think the banks should provide this service for free when no other business gives you free service?
Bruce


Not trying to be mean or pull anyone's leg. It is just what I believe, and most people I know-family, friends, co-workers-think I'm right and believe that banks will do anything to nab an extra buck or two. Makes for a good discussion!
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Re: Bank mailed me letter, $5 fee starts in June, criminal.

Postby Default User BR » Tue Apr 30, 2013 1:24 pm

I maintain an account at US Bank for the extreme convenience. They have branches close to me, including one inside a supermarket that provides extended hours (until 7pm weekdays, 4pm Saturday, and even Sunday hours until 3pm). Their ATMs are found in all stores of that supermarket chain and a prominent convenience store chain. I put up with the balance hassle for that. That's the way it is.


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Re: Bank mailed me letter, $5 fee starts in June, criminal.

Postby Grt2bOutdoors » Tue Apr 30, 2013 1:24 pm

crowd79 wrote:Banks profit on the difference of the interest they pay me and turning around and lending that money to someone else. I don't care if it's $1 million or $50. To say that the bank makes nothing off of consumers with small balances is wrong.


No one is forcing you to keep your money there. If you don't like it, then leave. Will that be cash or check? :twisted:

Used to work in a bank in college, generally a pleasant job until we had to deal with folks who complained about fees, always wanting something for nothing. :oops: The entitlement factor.
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Re: Bank mailed me letter, $5 fee starts in June, criminal.

Postby yosef » Tue Apr 30, 2013 1:26 pm

There are 2 sides to everything. Sure, the bank has to make money overall, but that doesn't mean that each individual account/customer has to be profitable on its own. It's no secret that credit cards and loans are the places where banks make their money. I would assume that checking accounts are "loss leaders" almost regardless of average balance since they tend to house people's working cash, and therefore have pretty volatile balances. Further, they are by design supposed to have a larger number of transactions going through them. I would tend to agree that $300 is a low bar, but I think the area of concern is more the idea that banks are moving towards making their profits from consumer checking accounts instead of actually making loans.
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Re: Bank mailed me letter, $5 fee starts in June, criminal.

Postby ieee488 » Tue Apr 30, 2013 1:30 pm

crowd79 wrote:
Retread wrote:
crowd79 wrote:Banks profit on the difference of the interest they pay me and turning around and lending that money to someone else. I don't care if it's $1 million or $50. To say that the bank makes nothing off of consumers with small balances is wrong.

Are you just pulling all of our legs, or do you really believe this? I spent my career in banking and I can tell you there is no profit in a $300 checking account. Those are the customers that consume a lot of time with problems in their accounts, write a lot of small checks, overdraw the account and use few other services. The bank is only willing to give you the deal you have because they hope you will use their credit card, installment loans and similar services. What makes you think the banks should provide this service for free when no other business gives you free service?
Bruce


Not trying to be mean or pull anyone's leg. It is just what I believe, and most people I know-family, friends, co-workers-think I'm right and believe that banks will do anything to nab an extra buck or two. Makes for a good discussion!


If that is what you believe, then you are not doing your math or you have never been in any kind of business.
There are costs to everything, and servicing your $300 account is a "loss leader" for your bank.
In effect, they don't care if you walk away, because they LOSE with your account as it currently is.
As jfet already calculated, the bank makes $14.50 on your $300 for the whole year if they were to loan out 90% of it at 5%.
A big whoop-do. NOT.
Last edited by ieee488 on Tue Apr 30, 2013 1:32 pm, edited 1 time in total.
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Re: Bank mailed me letter, $5 fee starts in June, criminal.

Postby Grt2bOutdoors » Tue Apr 30, 2013 1:31 pm

yosef wrote:There are 2 sides to everything. Sure, the bank has to make money overall, but that doesn't mean that each individual account/customer has to be profitable on its own. It's no secret that credit cards and loans are the places where banks make their money. I would assume that checking accounts are "loss leaders" almost regardless of average balance since they tend to house people's working cash, and therefore have pretty volatile balances. Further, they are by design supposed to have a larger number of transactions going through them. I would tend to agree that $300 is a low bar, but I think the area of concern is more the idea that banks are moving towards making their profits from consumer checking accounts instead of actually making loans.


For a checking account to be profitable, the bank would have to start charging a higher monthly fee plus per check charges and/or a higher compensating balance. Too much competition for it to be successful near term.
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Re: Bank mailed me letter, $5 fee starts in June, criminal.

Postby KyleAAA » Tue Apr 30, 2013 1:35 pm

crowd79 wrote:
Retread wrote:
crowd79 wrote:Banks profit on the difference of the interest they pay me and turning around and lending that money to someone else. I don't care if it's $1 million or $50. To say that the bank makes nothing off of consumers with small balances is wrong.

Are you just pulling all of our legs, or do you really believe this? I spent my career in banking and I can tell you there is no profit in a $300 checking account. Those are the customers that consume a lot of time with problems in their accounts, write a lot of small checks, overdraw the account and use few other services. The bank is only willing to give you the deal you have because they hope you will use their credit card, installment loans and similar services. What makes you think the banks should provide this service for free when no other business gives you free service?
Bruce


Not trying to be mean or pull anyone's leg. It is just what I believe, and most people I know-family, friends, co-workers-think I'm right and believe that banks will do anything to nab an extra buck or two. Makes for a good discussion!


So even though somebody with long, personal experience in banking flat-out told you you were wrong, you still believe you're right? Hmmm...
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Re: Bank mailed me letter, $5 fee starts in June, criminal.

Postby maroon » Tue Apr 30, 2013 1:43 pm

I agree with those who suggest looking around; in my experience, credit union fee policies may not be better than banks.

I closed my credit union checking account last summer when they instituted a $4/month fee for checking account balances of <$2K. (There were ways to avoid the fee, such as making 10 ATM transactions each month, but I wasn't interested in playing along.)

I opened a bank checking account that has no monthly fee, no minimum balance, free checks, unlimited check writing, etc. Also the employees at "my" bank know me by name, which the credit union employees never did. I should say this no-cost checking account is courtesy of an agreement between the bank and my large employer, yay. Guess the bank is looking to build business...

Edit: I guess I must be cheap to switch banking arrangements over $48 in annual fees! Ha! Actually, I was more aggravated by the CU's sudden policy change than the actual costs involved. Also, in my case, the bank trumps the credit union in convenience.
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Re: Bank mailed me letter, $5 fee starts in June, criminal.

Postby winglessangel31 » Tue Apr 30, 2013 1:45 pm

crowd79 wrote:
Retread wrote:
crowd79 wrote:Banks profit on the difference of the interest they pay me and turning around and lending that money to someone else. I don't care if it's $1 million or $50. To say that the bank makes nothing off of consumers with small balances is wrong.

Are you just pulling all of our legs, or do you really believe this? I spent my career in banking and I can tell you there is no profit in a $300 checking account. Those are the customers that consume a lot of time with problems in their accounts, write a lot of small checks, overdraw the account and use few other services. The bank is only willing to give you the deal you have because they hope you will use their credit card, installment loans and similar services. What makes you think the banks should provide this service for free when no other business gives you free service?
Bruce


Not trying to be mean or pull anyone's leg. It is just what I believe, and most people I know-family, friends, co-workers-think I'm right and believe that banks will do anything to nab an extra buck or two. Makes for a good discussion!

Good discussions are when participants present strong, valid arguments, and leave with a greater understanding of the issue. I can only hope that you realize what we're all trying to tell you, i.e., you are probably wrong, along with your friends who really think you are right, save for those who politely decline to argue with you...
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Re: Bank mailed me letter, $5 fee starts in June, criminal.

Postby Calm Man » Tue Apr 30, 2013 1:51 pm

OP seems quite dug in on this. It is his right. Just to understand, I don't like banks however I appreciate the value they bring. Last night with a few clicks I paid several bills and sent a quickpay to get some money to my daughter and she had it in seconds. With no disrespect to OP, if I ran a bank I would be happy to not have to deal with an account with less than $300 or $2000 for that matter. It costs a lot to maintain an account. And there is no profit made on a balance of $200. I also wonder how one can run a financial life with less than a $300 checking balance if one has bills to pay.
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Re: Bank mailed me letter, $5 fee starts in June, criminal.

Postby deanbrew » Tue Apr 30, 2013 2:02 pm

Whether a particular account makes money for a bank is irrelevant. I don't worry whether a store is making money on a sale item, only whether or not it is an attractive deal to me. The pertinent advice is to shop around for whatever deal floats your boat. There are banks and savings loans all over the place, offering lots of competition and points of comparison. See what checking products they offer.

For me, a $300 minimum balance is VERY reasonable if the branch and ATM locations are convenient. I think the OP needs to give some thought to pros and cons of switching based on other banking opportunities. He should also realize that bank offerings are constantly changing, so today's structure will likely change. That doesn't mean the bank is evil or greedy.

I chose my bank based on the branch location and their ATM network, but have come to like the manager and assistant manager, who have helped me out with different issues.
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Re: Bank mailed me letter, $5 fee starts in June, criminal.

Postby crowd79 » Tue Apr 30, 2013 2:21 pm

I've been thinking about this all day and reading this forum from time to time. I guess on the end, the convenience factor wins out and I'll suck it up by adding another $300 to the account....
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Re: Bank mailed me letter, $5 fee starts in June, criminal.

Postby livesoft » Tue Apr 30, 2013 2:38 pm

This might make you feel better: USAA closed my checking account without telling me. When I asked about it a couple years later, they said they had no record that I had ever had a checking account with them. They said any money in the account was rescinded escheated* to the state. How's that for great service? :)

So banks can "fire" customers if they don't like them.

*Thanks Retread for the correction.
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Re: Bank mailed me letter, $5 fee starts in June, criminal.

Postby swong » Tue Apr 30, 2013 2:49 pm

When you really think about it there is no choice in NOT keeping your present checking account. It would be a royal PITA having to revise the routing and checking account number to all your accounts where you make recurring monthly payments. As someone else mentioned how on earth can you just keep $300 when for the average homeowner automatic bill payments typically run in the thousands on a monthly basis?...recurring monthly expenses for me include automatic debits for telephone, electricity, credit cards (AMEX for my Costco groceries, and just one each of Visa and Mastercard), retiree debit for our monthly medical/dental premiums, etc. The most important non recurring debits are for homeowner's insurance, car insurance, quarterly water/sewerage debits, separate umbrella policy debit, annual real estate tax (ugh!) to the city....personally I cannot see NOT having a checking account. BTW, this thread really really got heated and once again was even downright rude and brutal to the originator.....Rodney King once said..."...cann't we all just get along?"....humor intended here!
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Re: Bank mailed me letter, $5 fee starts in June, criminal.

Postby red5 » Tue Apr 30, 2013 3:56 pm

Wow, a lot of strong opinions are being discussed here, perhaps some are a bit overboard.

Anyhow, it is simple. The bank has their right to assess a $5.00 fee for accounts less than $300.00. It is not criminal and I certainly understand your point how they make money off of your few hundred you keep in there. Thank goodness we live in a free society where one can cancel an account and set up a new one with another bank. I recently cancelled an account for just such a purpose.

Expecting free checking certainly does not constitute a sense of "entitlement" either just as expecting cheap mutual funds does not constitute "entitlement". It's shopping around and finding the best deal.
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Re: Bank mailed me letter, $5 fee starts in June, criminal.

Postby littlebird » Tue Apr 30, 2013 4:10 pm

VictoriaF wrote:Why to use banks? Credit unions are much better.

Victoria

That's an overgeneralization. The credit unions available to me in Arizona are in no way better than the banks available to me. I've tried the c.u.'s three separate times in 20 years and they were inadequate to my fairly modest needs each time.
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Re: Bank mailed me letter, $5 fee starts in June, criminal.

Postby billern » Tue Apr 30, 2013 4:23 pm

red5 wrote:Wow, a lot of strong opinions are being discussed here, perhaps some are a bit overboard.

Anyhow, it is simple. The bank has their right to assess a $5.00 fee for accounts less than $300.00. It is not criminal and I certainly understand your point how they make money off of your few hundred you keep in there. Thank goodness we live in a free society where one can cancel an account and set up a new one with another bank. I recently cancelled an account for just such a purpose.

Expecting free checking certainly does not constitute a sense of "entitlement" either just as expecting cheap mutual funds does not constitute "entitlement". It's shopping around and finding the best deal.
It sure looks like entitlement when someone calls the bank's activity criminal for adding a $5 fee that will apply for low balances that they give proper notification of.

OP is free to take his business elsewhere if he can get a better deal (either on price or the qualify of the service) but he should not hate the former bank for their policies or call them names. It is just business.
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Re: Bank mailed me letter, $5 fee starts in June, criminal.

Postby Retread » Tue Apr 30, 2013 4:37 pm

livesoft wrote:They said any money in the account was rescinded to the state.

What's "rescinded"? Do you mean escheated?

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Re: Bank mailed me letter, $5 fee starts in June, criminal.

Postby arthurb999 » Tue Apr 30, 2013 4:53 pm

Banks do offer pretty good products and services. For example, online banking, bill-pay, taking pictures of checks to deposit, access to your money anywhere, etc.
A 300 balance seems like nothing... they probably want profitible customers... and the sub-300 checking account customer is likely not very profitible.
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Re: Bank mailed me letter, $5 fee starts in June, criminal.

Postby likegarden » Tue Apr 30, 2013 5:03 pm

My local bank started to deduct a fee because one account was below $300 they said. When they started the deduction the account had over $300, after deducting for 2 months it was below 300. I tried to explain to them that they had failed basic math, but they did not give in, it became crazy. So I cashed in the account and moved $25,000 from a CD at their bank to Vanguard.
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Re: Bank mailed me letter, $5 fee starts in June, criminal.

Postby nisiprius » Tue Apr 30, 2013 5:38 pm

Retread wrote:
livesoft wrote:They said any money in the account was rescinded to the state.

What's "rescinded"? Do you mean escheated? --Bruce
I think he meant "usufruct, [OT comment removed by admin LadyGeek]
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Re: Bank mailed me letter, $5 fee starts in June, criminal.

Postby Retread » Tue Apr 30, 2013 5:47 pm

nisiprius wrote:
Retread wrote:
livesoft wrote:They said any money in the account was rescinded to the state.

What's "rescinded"? Do you mean escheated? --Bruce
I think he meant "usufruct, [OT comment removed by admin LadyGeek]

I don't follow. I know what a usufruct is but I don't understand the context.
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Re: Bank mailed me letter, $5 fee starts in June, criminal.

Postby BigFoot48 » Tue Apr 30, 2013 5:58 pm

My MIL has to keep $5,000 in her Bank of America checking account to avoid the monthly fee, which would be slightly more than the interest she loses by not having those funds in a money market account.
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Re: Bank mailed me letter, $5 fee starts in June, criminal.

Postby z3r0c00l » Tue Apr 30, 2013 7:01 pm

crowd79 wrote:So you think it's ok for banks to charge people to borrow their money? This is just another way for banks to increase their profits at the expense of the little guy.


Well yes it is both legal, ethical, and common for banks to charge. So that hits all of my marks for "ok." The bank earns nearly nothing on the $300 balance and it costs the more to operate the account than they earn, or at least as much as they need to profit from an account. This is called capitalism. This kind of thing is important because of the employees of the bank who have to make a living, and the owners of the bank who include, if it is a big bank, people like us. I keep a $15,000+ balance at Chase bank across two accounts, and get a really good relationship going with zero fees and better interest rates. This means keeping about $2000 in my checking at any given time, because my monthly charges approach this amount. The lost $5 interest per year is annoying, but worth it to have my income and payments coming out of one account with a buffer to prevent hitting zero. Don't hate the player or the game, just play the game right.
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Re: Bank mailed me letter, $5 fee starts in June

Postby LadyGeek » Tue Apr 30, 2013 7:02 pm

I retitled the thread (removed "criminal"). Please stay on-topic to provide constructive suggestions.
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Re: Bank mailed me letter, $5 fee starts in June

Postby livesoft » Tue Apr 30, 2013 7:12 pm

I probably would not have responded at all if the word "criminal" wasn't in the title. :) That word is what riled me up.
It's all about short-term opportunistic rebalancing due to a short-term change in one's asset allocation, uh, I mean opportunistic rebalancing, uh I mean rebalancing, uh I mean market timing.
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Re: Bank mailed me letter, $5 fee starts in June, criminal.

Postby Alskar » Tue Apr 30, 2013 7:34 pm

bUU wrote:I used to believe that. I actually was a member of technical staff for a leading research and development organization back in the 1980s. Our lab was focused on quality management and customer loyalty. By the end of the 1980s, more in-depth investigations started revealing that quality wasn't free, and that it needed to be managed like any other costly asset. And customer loyalty was found to be among the most over-valued assets in the quality management portfolio. And it has only gotten worse since then, as the American consumer has maniacally pursued a policy of selecting the low-cost provider with no appreciable consideration of quality.

American businesses learned from their mistakes, and now realizes just how little customer "loyalty" is worth.

I had a similar revelation in a slightly different context. In 2005 I was working for a well known manufacturer of video electronics with approximately $800M (USD) in sales. One day I stopped into a nearby Fry's Electronics during lunch to pick up some stuff for a home project. On my trek back to the components section I wandered by an end-cap that displayed a >60" plasma TV made by a well known Korean manufacturer of electronics, appliances and cellphones. To my trained eyes the image on this $3,500 looked horrible. Just awful. There is no way my employer at the time would have approved something that horrible for shipment. It took me a few minutes to realize the issue: The fancy-smancy video deinterlacer in this TV (branded with an extremely well known brand known for its deinterlacing technology) was configured to ALWAYS display the odd and even fields out of sync. I asked the salesperson if the TV was popular. He said it was one of their top selling TV's even at $3,500. He kept saying "People love that TV!" The only issue with the image that I could see was the rather glaring fact that the firmware in the TV was configuring the deinterlacer improperly. Sometimes a bad splice would cause the 3:2 pulldown would cause the deinterlacer to momentarily flip the odd and even fields. When that occurred the image would love great for a second until the deinterlacer "corrected" the 3:2 pulldown.

As I walked away chuckling about how funny it was that these idiots couldn't get something this basic right, I suddenly realized the implication: My current employer was doomed! If an image this bad wasn't putting off buyers of this $3,500 plasma TV, then there was absolutely NOTHING my employer could do to compete with them on quality. The only thing that matters is price. A >60" plasma TV with a horrible firmware bug was an easy-sell at $3,500.

I left the company shortly thereafter and that employer is no longer a public corporation. They still exist but are barely hanging on.

This experience and others has left with with a rather fatalistic attitude toward consumer issues. People will buying anything if its cheap enough. Quality matters hardly at all.

Financial institutions seem to be the flip-side of consumer products. I'm astounded what financial institutions will give away for free (free to me anyway). I get 3.00% APR interest on the first $25K in my checking account at my credit union if I jump through a few easy hoops (12 debit/credit transactions per month, electronic statements, 1 ACH transaction, etc). That's over $750 a year for almost no work. Fidelity gives me superlative customer service even though I make less than 10 trades a year. Half the time my trades at Fidelity are free anyway because I get free trades for rolling money over from 401(k) plans in Fidelity. I can't believe that I'm still getting 2% cashback on everything I purchase with my Fidelity AMEX and 1.5% on my Fidelity Visa CC. When I was traveling all the time I was making over $1K a year on my AMEX card...how great is that?

So if a bank wants to charge you $5 a month for having too little in your account, find another bank that won't charge you or keep more money in your account. The bank is making decisions based on what they believe is good for them. You're free to make decisions about what's good for you. As my dad always says, "It's not personal, it's business".
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Re: Bank mailed me letter, $5 fee starts in June, criminal.

Postby sadie wess » Tue Apr 30, 2013 7:44 pm

livesoft wrote:I have to smile. What "business" are you taking elsewhere? If you have less than $300 in your account with them, you really are just a nuisance, not a criminal. Sorry, but look at it from their point of view.


Very good point and quite true. As usual, Livesoft is being forthright, yet gentle about it.

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Re: Bank mailed me letter, $5 fee starts in June

Postby frugaltype » Tue Apr 30, 2013 7:58 pm

Move it to a credit union that doesn't do that. dcu.org, for example, anyone can join them for a $10 one time only donation to a charity from the list on their site. They belong to a cu group, so you can "bank" with them at many credit unions all over the place.
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Re: Bank mailed me letter, $5 fee starts in June, criminal.

Postby LadyGeek » Tue Apr 30, 2013 8:51 pm

Alskar wrote: I get 3.00% APR interest on the first $25K in my checking account at my credit union if I jump through a few easy hoops (12 debit/credit transactions per month, electronic statements, 1 ACH transaction, etc)... That's over $750 a year for almost no work.

Math check: I assume you get 3.00% APY. ($750 = $25k * 0.03)

For those who don't understand the difference, see: APR versus APY

Wiki wrote:There are two ways of expressing compound interest. Although the results are identical, the manner in which the interest rates are presented has implications to borrowers and lenders.[14] As defined below, Annual Percentage Rate (APR) is always a lower number than Annual Percentage Yield (APY).

* Lenders, such as banks or other institutions, will quote the higher APY to entice customers. For example, bank savings accounts are advertised using APY, as customers are looking for the highest rates.
* Borrowers looking for the lowest rates will be attracted to the lower APR. For example, mortgages and automobile loans use APR to entice borrowers with low rates.

To find the total interest paid over the life of a loan, use Excel's CUMIPMT() function, not FV().
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Re: Bank mailed me letter, $5 fee starts in June

Postby camaro327 » Tue Apr 30, 2013 9:37 pm

I'm with the low bar theory on this one. $5 is small potatos, considering you can only earn 1% annually or $3 on that amount anyway. Its basically costing you $3 to have the convience of a checking accounting for 1 year.
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Re: Bank mailed me letter, $5 fee starts in June

Postby indexfundfan » Tue Apr 30, 2013 10:49 pm

Actually I am quite happy with my "electronic" checking account from Incredible Bank

https://www.incrediblebank.com/

which is part of River Valley bank, the bank referenced by OP. I have this account since its introduction in 2009, and the interest it pays is in the "top" tier, currently 0.81% APY, all without any debit card requirements (it's not a reward checking account).

I did receive the pricing change:

A maintenance fee of $15.00 will be assessed on your Incredible Internet checking account if the average collected balance falls below $300.00 during a statement cycle. This will become effective on June 1st 2013.

I keep a much higher balance than that in the account.
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Re: Bank mailed me letter, $5 fee starts in June, criminal.

Postby tibbitts » Tue Apr 30, 2013 11:21 pm

crowd79 wrote:Banks profit on the difference of the interest they pay me and turning around and lending that money to someone else. I don't care if it's $1 million or $50. To say that the bank makes nothing off of consumers with small balances is wrong.

Surely you can't believe that. There are costs to maintaining any open account, and those costs can be more than a bank can earn on a deposit balance of $50 over the course of a year.

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Re: Bank mailed me letter, $5 fee starts in June

Postby scrabbler1 » Wed May 01, 2013 12:09 am

Back in the late 1980s, I had an account with Citibank and was well over their minimum balance to avoid monthly fees. But after I bought my apartment, I fell below that balance which had risen in those years I was saving up. So I switched to another bank which had minimum balance requirements much lower and which I could meet. There were also other benefits at the time such as the new bank and not Citibank being part of NYCE which was the beginning of banks becoming interconnected so you could other banks' ATMs to withdraw cash (and without fees, back then).

But fast forward to today when banks can now offer more everyday services (debit cards, online banking, ACH payments) but also can nickel-and-dime customers for services which used to be free. That being said, minimum balance requirements have not changed a whole lot in the last 25 years. They go up, they go down, but I still leave around $1,500-$2,500 in my basic checking account which includes a safety cushion while avoiding fees and obtaining those newer, everyday services I mentioned above.

In those 25+ years, I found that the frequent bank takeovers and mergers caused less favorable account terms (i.e. higher minimum balances) but sometimes only temporarily. But I don't mind "lending" my bank $1,500-$2,500 (especially at low interest rates) to obtain all of those services I can take for granted every day.
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Re: Bank mailed me letter, $5 fee starts in June

Postby bUU » Wed May 01, 2013 5:38 am

LadyGeek wrote:I retitled the thread (removed "criminal"). Please stay on-topic to provide constructive suggestions.

Good idea. Sometimes the thread is inextricably more so about the act of the OP starting the thread than about the matter that the OP's comment was actually about.

camaro327 wrote:I'm with the low bar theory on this one. $5 is small potatos, considering you can only earn 1% annually or $3 on that amount anyway. Its basically costing you $3 to have the convience of a checking accounting for 1 year.

I think there is something to be said for moving to better arrangements when they're available, though. Having said that, this is something my spouse and I don't necessarily see eye-to-eye on:
  1. I'd have been more than happy to move our emergency fund from ING Direct to Ally Bank to go from 0.85% to 0.90% interest, back when that was an option; after all, what does it cost us?
  2. Right now we're in a 3.125% mortgage, and I bet I could get us down to 3% even after rolling all the fees and closing costs into the loan, and even knock a couple of years off the term of the loan (which would be good for us, I feel, given our ages).
  3. When we left Bank of America at the end of last year, we replaced it with Fidelity's Cash Management account for checking and bill pay, and a local bank for ATM deposits and just-in-case we need cashier's checks. Come the beginning of this year, and suddenly, Bank of America is offering a free checking account without teller access that would be better than what we just switched to. I'd have no problem just switching things around again. Such changes would literally cost us nothing but time, and generally pretty minimum expenditures of time, at that.
My spouse would go ballistic if I suggested any of the above changes. (Which is another lesson that financial planners need to learn: Often the calculations need to factor in the cost of the wrath of the spouse.) [Thinking about it now, though, if any of the three banks we're currently relying on instituted a $5 per month fee, I'm pretty sure my spouse would endorse changing things around again; very strange given that the difference between 3.0% and 3.125% on the mortgage represents far more money.]
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Re: Bank mailed me letter, $5 fee starts in June

Postby frugaltype » Wed May 01, 2013 6:47 am

I agree with the OP.

I would like to know what a $300 account costs a bank, if they don't issue paper statements.

Unless the customer is traipsing in there or taking up phone time, my guess is check processing time, which I will bet is largely automated for large banks. And the customer is not writing a lot of checks at that amount. So, in the noise. Plus today's $300 customer is tomorrow's larger customer if they are treated with courtesy.

Let me just reiterate about credit unions: I have accounts at several because of the federal insurance limit. Two offer safe deposit boxes, so I have one at the locally convenient cu. The only thing any of them require me to do is to have a $5 membership account. No annual fees for any type of account, no other minimum balance. Of course, there is an annual fee for the safe deposit box.

I do most of my "bank" stuff with Digital Federal Credit union, and have for decades, even though they don't even have a branch in this state. If I feel the need to do stuff in person, I can go to one of their nearby allied credit unions. I mail them occasional checks, but I could scan them in if I wanted to. I have direct deposit for income. They email me on their secure site a monthly credit score for free.

I could pay bills online with them. (I charge most everything because of 1% cash back, and with a few clicks I pay my cu credit card every month.) I have access to their ATM network or I just walk into one of the other or their allied cus and cash a check.

They have for years had higher interest rates on CDs than any bank I have seen.

Their customer service phone people are native English speakers and are courteous. I am never ever again doing business with any company whose phone people are unintelligible, unknowledgable offshore workers.

They have $4 billion in assets, so they must have a viable business model.

It's beyond my comprehension why any individual does business with a bank. Business stuff I can't speak to.
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Re: Bank mailed me letter, $5 fee starts in June

Postby bUU » Wed May 01, 2013 7:18 am

frugaltype wrote:I agree with the OP. I would like to know what a $300 account costs a bank, if they don't issue paper statements. Unless the customer is traipsing in there or taking up phone time, ...

Why ignore those?

There are banks that have accounts where they charge for each teller interaction, or charge for teller interactions beyond one or three a month or some such.

And if you don't have one of those types of accounts, then even if you personally aren't engaging in such interactions, you're still paying an even share of the value others with the same type of account derive.

frugaltype wrote:Plus today's $300 customer is tomorrow's larger customer if they are treated with courtesy.

Prove that with real research data. [To be fair, I realize that only the banks themselves are likely to have the data that shows whether what you've said is true. Our best hope for knowing what their data says is to watch their actions.]

frugaltype wrote:It's beyond my comprehension why any individual does business with a bank. Business stuff I can't speak to.

The CUs here aren't better than the local bank I referred to above; and the local bank is on my street, while the CU is across town. That's why. :shrug: Why people deal with banks that charge fees for things that they could literally get for free from other banks - that I don't know.
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Re: Bank mailed me letter, $5 fee starts in June

Postby prudent » Wed May 01, 2013 7:22 am

frugaltype wrote:I agree with the OP.

I would like to know what a $300 account costs a bank, if they don't issue paper statements.

Unless the customer is traipsing in there or taking up phone time, my guess is check processing time, which I will bet is largely automated for large banks. And the customer is not writing a lot of checks at that amount. So, in the noise. Plus today's $300 customer is tomorrow's larger customer if they are treated with courtesy.


One source http://www.bankrate.com/financing/banking/banks-losing-big-on-free-checking/ says it costs banks about $350 a year to maintain a checking account. However, one can argue whether overhead should be part of that number, and perhaps marginal cost should be the more applicable cost.

So from the bank industry side, http://www.americanbanker.com/bankthink/free-checking-retail-banking-1045039-1.html they believe subtracting the overhead cost would indicated a cost to the bank of about $280 a year for a checking account.
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Re: Bank mailed me letter, $5 fee starts in June

Postby bUU » Wed May 01, 2013 7:30 am

prudent wrote:However, one can argue whether overhead should be part of that number, and perhaps marginal cost should be the more applicable cost.

Would you pay more for something than it is worth, just because it costs that much to provide it to you? Of course not. Pricing products and services based on cost is a losers' game. The question isn't how much things cost, but how much value they deliver. That's a market-based quantity that reflects the effect of alternatives.

pennstater2005 wrote:I was one of those customers.

Emphasis on the word "one".
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Re: Bank mailed me letter, $5 fee starts in June

Postby Bogle101 » Wed May 01, 2013 9:54 am

Jeez, why is this thread more than one response long? lol. I mean the bank did not sneak in a fee on you, they literally warned you way ahead of time.

Just keep more than three hundo in the account.

Problem solved.
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Re: Bank mailed me letter, $5 fee starts in June

Postby Faith20879 » Wed May 01, 2013 10:30 am

I don't have anything new to offer, except this old tune:

"Toto, we ain’t in Kansas no more."

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Re: Bank mailed me letter, $5 fee starts in June, criminal.

Postby crowd79 » Wed May 01, 2013 11:01 am

swong wrote:When you really think about it there is no choice in NOT keeping your present checking account. It would be a royal PITA having to revise the routing and checking account number to all your accounts where you make recurring monthly payments. As someone else mentioned how on earth can you just keep $300 when for the average homeowner automatic bill payments typically run in the thousands on a monthly basis?...recurring monthly expenses for me include automatic debits for telephone, electricity, credit cards (AMEX for my Costco groceries, and just one each of Visa and Mastercard), retiree debit for our monthly medical/dental premiums, etc. The most important non recurring debits are for homeowner's insurance, car insurance, quarterly water/sewerage debits, separate umbrella policy debit, annual real estate tax (ugh!) to the city....personally I cannot see NOT having a checking account. BTW, this thread really really got heated and once again was even downright rude and brutal to the originator.....Rodney King once said..."...cann't we all just get along?"....humor intended here!


I live well within my means and don't even have half the monthly bills listed here that would require a large checking account. I've always just kept enough in my checking account to write checks to family/friends on their birthdays and to pay the monthly electric bill. Everything else goes on plastic which I get cash back for and is paid by my Ally Savings account.
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Re: Bank mailed me letter, $5 fee starts in June

Postby frugaltype » Thu May 02, 2013 11:36 am

prudent wrote:
One source http://www.bankrate.com/financing/banking/banks-losing-big-on-free-checking/ says it costs banks about $350 a year to maintain a checking account. However, one can argue whether overhead should be part of that number, and perhaps marginal cost should be the more applicable cost.


I can't imagine what they're doing with that money. Perhaps they are averaging their costs over all their customers with no regard for what an individual customer costs them.
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Re: Bank mailed me letter, $5 fee starts in June

Postby prudent » Thu May 02, 2013 11:54 am

frugaltype wrote:
prudent wrote:
One source http://www.bankrate.com/financing/banking/banks-losing-big-on-free-checking/ says it costs banks about $350 a year to maintain a checking account. However, one can argue whether overhead should be part of that number, and perhaps marginal cost should be the more applicable cost.


I can't imagine what they're doing with that money. Perhaps they are averaging their costs over all their customers with no regard for what an individual customer costs them.


Never worked in a bank but this is what would make sense to me:
Assign a cost to each time a checking customer contacts the bank by phone or email.
Determine how many branches and tellers are there only because of checking customers (this would be a lot of money).
Cost of statement prep and mailing, processing and imaging of every check.
Cost of perks given to checking customers.
Marketing/advertising costs related to checking (most bank advertising I see is aimed at checking account customers).
I'm sure there's more.
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