Fees seem to have multiplied
in recent years. Either as charges for once-routine
services -- such as returning checks with statements
-- or as penalties for financial
missteps, banks and credit issuers hand out fees
for just about everything. With an ever-increasing
stable of charges and new and varied ways for
customers to incur those expenses, financial institutions'
revenue from fees is rising. Is there an end in
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On a national level, credit card companies operate
fairly unfettered in regard to interest rates
and fees. Even though some states have laws limiting
interest rates, federal law supersedes state regulations.
Though one state may have consumer-friendly laws,
others such as Delaware and South Dakota offer
a more hospitable business climate where the sky
is the limit. Companies can send cards to consumers
from those states to any other state and charge
pretty much what they want. An exclusive Bankrate.com
survey of the top 20 credit issuers in May
2007 found that some cards charge as much as $90
to transfer balances and $39 for going over the
fees keep rising
No federal law limits fees banks can levy on checking
or savings accounts, either. Take, for example,
the nonsufficient funds or bounced check fee.
"A bounced-check fee some years
ago, in the early 1990s, was estimated to cost
the bank somewhere between $1 and $1.50 including
the risk that the check would never be recovered,"
says Ed Mierzwinski, U.S. PIRG consumer program
director. An exclusive survey of the top 10 banks
in 10 major metropolitan areas across the country
done by Bankrate.com researchers in May 2007 found
that NSF fees can cost as much as $38.
"Fees that were formerly alleged
to be high because they were having a so-called
deterrent value, are now high because they are
a profit center," says Mierzwinski.
How much of a profit center fees
actually are for banks is open to interpretation.
Ross Waldrop, senior banking analyst at the Federal
Deposit Insurance Corp., says service charges
on deposit accounts (checking and savings), more
than doubled between 1996 and 2006, going from
$17.3 billion to $36.3 billion. He contends that
the amount of money on deposit at insured banks
"The $17.3 billion back in
1996 represented about 62 cents for every $100
of deposits. In 2006, it works out to about 66
cents for every $100 of deposits," Waldrop
says. "If you look at the service charges
on deposit accounts as a percentage of the average
deposits, there hasn't been a real dramatic change."