Of course I deserve free banking!

Over at the NYTimes Bucks Blog, people are angry that a bank might actually charge you for the services they supply. 

This reminds me of people who think they shouldn’t have to pay for investment advice either. Why would someone invest their time, resources and set up the required infrastructure for  [running a bank account / giving investment advice] unless they thought they would make a living doing it? They need to get paid somehow too, and the question is, how?

I submit that it should be more concerning when you, the client, are the not one paying. If I pay for my BOA account, I know what I’m getting for my fees. If I’m not paying… how are they making money? I know they have costs – an online set of tools, mobile phone apps, international transfers, branches, customer service lines, and just setting up and running ATMs and debit cards. So how are they making money?

In the case of current/debit accounts, for a long time it was people who were bad at managing money who subsidized free accounts. Bounced check fees, overdraft fees – all the things which are a pain for the bank, were made more painful for us by paying for it. But if you were careful and didn’t commit one of these sins, you got a free account.

Let’s be clear – there  is nothing unfair with BOA charging you for their service. If you want to, you can always switch to someone who doesn’t charge such fees. But know that they too are getting paid somehow. You just don’t know how.

*Disclosure: I personally have accounts with BOA, and have been pretty happy with them. I also have accounts with a credit union, and my experiences with BOA’s customer service has been on par. But BOA offer me a much better online experience and set of options. I have to snail-mail my cooperative bank to change my address, as if that’s more secure than logging into my online account somehow..

I do not own any BOA stock.


One thought on “Of course I deserve free banking!”

  1. Dan,

    Businesses need to make money – no argument there. And customers do need to be accountable for their own money management. However, raising fees on something, somewhere regularly is a short term fix. A typical bank will set revenue projections, then review fees across the board to assist in meeting the objective. Where is innovation to build business? If economies of scale truly apply, fees should be going down…..except when banks make bad decisions, or take risky bets. Recouping falls on the head of the little guy…. I have empathy for all sides but the cycle needs to change.

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