Banks search for revenue from wary customers
February 03, 2012
Banks and consumers are doing a sort of stiff-armed, guarded dance with each other these days. But is it possible that these partners will melt into each other's arms in the coming year?
A prediction: Expect the dance floor to encounter further shake-ups in the coming months as more and more banks and customers part company.
Here's why: Despite having apologetically dropped their plans to charge customers for debit card use, banks are still looking for ways to recover the billions of dollars in revenue they're likely to lose from recent government regulations.
For the most part, they'll have to get that revenue through charging new fees or by reducing services. And as shown in the past year by events such as Bank Transfer Day, some people likely won't put up with either scenario, leading them to close their checking accounts and move to a different institution.
Although a recent survey from TD Bank found that most people remain committed to their banks and aren't planning to leave, the outcry over new charges last fall -- and the subsequent growth in credit union membership -- showed that customers don't have an unlimited tolerance for fee hikes.
Banks get creative
Bank revenue has been hit from two key areas -- declining revenue from overdraft charges and reduced swipe fees for debit card transactions. Overdraft charges have declined in the wake of government regulations that prevent banks from automatically enrolling you in overdraft protection for your checking account, a situation that resulted in sharp increases in overdraft revenues for banks.
In response, banks have added monthly charges to checking accounts, increased ATM fees and added charges for a litany of other services, such as paper statements and cash deposits. And though Bank of America took much of the heat on the issue, there were quite a few banks who also flirted with debit card fees before the topic erupted last fall.
Now some experts are again expecting a flurry of new fees in 2012. Those fees could include higher safe deposit box fees, as well as more fees for face-to-face transactions and even for closing an account. The minimum balances needed to avoid a checking account fee may also rise, and the same goes for one-time charges from things such as expedited payments.
You might also expect higher overdraft fees, if you have opted to have that protection for your checking account. The latest MoneyRates.com Bank Fees survey shows that overdraft fees steadily crept up in 2011, and there's little evidence that trend will reverse in 2012.
Despite this flurry of fee increases, the TD Bank study suggests that most bank customers are satisfied with their bank. The data found that two-thirds of those surveyed "feel valued" by their bank, and 40 percent even said their bank demonstrates a commitment to them through low balance requirements.
So if you go back to the dance floor, the banks seem to want to pull their partner in closer in 2012. Whether their partner will let them do this, however, will be one of the issues to watch in the coming year.