Fees helping banks to boost their bottom lines

Your Money

October 21, 2007|By David Lazarus | David Lazarus,LOS ANGELES TIMES

News that Bank of America is jacking up its ATM fee in some locations for non-customers to $3 from $2 prompted the usual muttering about money-grubbing financial institutions that nickel-and-dime people to death.

But Bank of America's decision isn't the real story. It's the fact that virtually all banks increasingly rely on a wide variety of fees to boost their bottom line, and the trend shows no sign of abating.

According to the Federal Deposit Insurance Corp., about 42 percent of banks' annual revenue last year came from non-interest income, which is dominated by money from fees. That's up from about 34 percent a decade ago.

Andrew Gray, an FDIC spokesman, said this highlighted "the industry's increasing reliance on fee-based sources of income."

Some people shrug off bank fees as a fact of life.

"Banks are in business like anyone else. Their job is to make money, and the place where you make money is fees," said Brian Porter, 54. "Banks are under tremendous pressure to generate fee income," Porter said.

The 50 percent increase in Bank of America's non-customer ATM fee obviously won't sit well with anyone who needs some ready cash by turning to one of the bank's more than 16,000 machines, the largest ATM network in the country.

"It doesn't cost the banks that much," said a disgusted David Kavanagh, 45, who was visiting Southern California from Ireland recently. "It should be free."

The American Bankers Association estimates that, as of last year, about 395,000 ATMs were in use nationwide, handling 10.1 billion transactions.

Bank of America by far had the largest number of machines, followed by Cardtronics (10,000), JPMorgan Chase (7,310), U.S. Bancorp (7,164) and Wells Fargo (6,200).

Bank of America argues that the fee increase benefits its customers by providing an incentive for non-customers to take their ATM needs elsewhere.

"If you are a customer of Bank of America, you will have greater access to our network of ATMs," said Diane Wagner, a spokeswoman for the bank. "This may also encourage non-customers to become customers so they can avoid the fee."

"If people don't like paying the fees, use your own bank," said Lorikeet Simon, 38, a financial services worker and Bank of America customer. "If you don't like the fees, vote with your dollars."

Fees vary depending on your bank and account.

Bank of America charges $3 to return your canceled checks with your monthly statement.

The bank charges nothing for you to speak by phone with a checking-account service representative six times a month. After that, it's $1 per call in many cases. Your seventh call to Bank of America's automated phone service, and all subsequent such calls in a given month, can run 50 cents.

Wells Fargo may charge $2 if you speak with a service representative by phone "when your request could have been handled by our automated service."

Wells Fargo charges some customers a $1 monthly "point-of-sale purchase fee" to use its debit cards.

Citibank charges some customers $5 to draft a money order. Non-customers are charged $10.

If you want to stop payment on a check, Citibank may charge $30.

"The only requirement for banks is that they disclose their fees," said Ed Mierzwinski, consumer program director for the U.S. Public Interest Research Group. "Otherwise, neither Congress nor the regulators believe in capping fees."

Tara Terry, a 45-year-old legal secretary, said her absolute least-favorite fee was her bank's overdraft fee. "I got hit with a fee for $20 just because my payroll deposit hadn't arrived until a few minutes after I made a payment for something else that same day."

In fact, the nonprofit Center for Responsible Lending said in a recent report that banks were charging customers a total $17.5 billion a year in overdraft fees, up 70 percent from 2004.

The system is so out of whack, according to the center's report, that the overdraft fees are larger than the $15.8 billion that consumers were overdrawing.

David Lazarus writes for the Los Angeles Times.

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