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Another free-checking domino falls

By Claes Bell, CFA · Bankrate.com
Thursday, March 8, 2012
Posted: 2 pm ET

Wells Fargo plans to drop free checking in 6 more states, expanding the reach of a fee scheme the bank had been testing in western states that placed a $7 (or $5 with a month fee on the bank's basic checking account; see update below). From Blake Ellis at CNNMoney:

The $7 monthly service fee will be assessed on the bank's Essential Checking account. Customers can waive the fee by maintaining a $1,500 minimum daily balance or making direct deposits of $500 or more each month. They can also get a $2 discount on the fee by opting to only receive online statements.

The monthly fee will be effective May 4 in the six states, and will begin showing up on June statements (if the requirements for getting the charge waived aren't met).

Update: The states affected will be Georgia, New Jersey, Delaware, Connecticut, New York and Pennsylvania. Ellis writes that the bank wouldn't disclose which banks would be affected, and I haven't had any luck reaching anyone either. From Wells Fargo's perspective this is probably a smart tactic. As I wrote yesterday, bank customers hate price transparency, and what they don't know won't hurt … Wells Fargo.

The bank is probably betting that at least some of those customers won't notice that nifty little charge on their bills, and don't want to be part of the media feeding frenzy that accompanies new checking fees these days.

Not coincidentally, the bank is also considering branch closings, joining several of its big-bank brethren. Here's Jason Ma of Investor's Business Daily:

Rival Bank of America (BAC) has been reducing branches, and JPMorgan Chase (JPM) recently slashed its branch expansion plan to 900 from 2,000.

Wells Fargo CFO Timothy Sloan told an analysts' conference Wednesday that the bank may close or consolidate offices, with wealth-management or mortgage staff potentially taking over some branches.

The bank later issued a statement that sought to downplay Sloan's remarks.

"We continually make decisions on how best to increase the efficiency of our networks, which is focused on how to best serve our customers and meet their financial needs," Wells Fargo said.

"While we may streamline or even expand our offices and stores in business areas such as in mortgage and brokerage and within various geographical locations, we certainly have no plans to reduce our retail presence," the bank said.

In the wake of some of the regulatory changes I talked about on the blog yesterday, banks are facing a difficult decision: cut costs by closing branches and losing some of their national reach, or boost fees in an environment where doing so risks enraged customers and intense media coverage. Gone are the days when they could casually raise fees and people didn't care about account pricing, and banks know that, but at this point, they seem to have little choice.

What do you think? Are banks boosting fees out of greed, or do they need to do it to survive?

Follow me on Twitter: @ClaesBell

Update: A Wells Fargo spokesperson contacted me with information on which states would be affected, and what the new fees would be adding this:

I think it’s important to note that we believe the large majority of our customers will continue to have their monthly service fee waived.  Each of the consumer checking and savings accounts we offer today has at least one, and in most cases, several ways to waive the monthly service fee. For example, many of our customers qualify for the fee waiver by having monthly direct deposits totaling $500 or by maintaining a minimum balance of $1,500. Other accounts may qualify for a fee waiver by having a Wells Fargo Home Mortgage.

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