In a national popularity contest, paying bank fees would probably fall somewhere between scraping your windshield on an icy morning and getting dental surgery. In a Bankrate poll late last year, 72 percent of bank customers said they'd consider switching banks over increased checking fees.
Consumers' aversion to bank fees has forced banks to think of new ways to make money on checking account deposits, especially in the face of low interest rates and a changed regulatory landscape.
A couple of regional banks are trying an a la carte approach that charges for individual services rather than bundling checking account services in a single package. From Suzanne Kapner of The Wall Street Journal:
Sharon Manning didn't like paying her bank each month for services she rarely used. So when a nearby lender offered to sell her only what she wanted, the 54-year-old Texas Realtor jumped at the chance.
With Frost Bank, a San Antonio-based unit of Cullen/Frost Bankers Inc., Ms. Manning has an account that carries a $5 monthly fee for basic checking that includes online and phone banking, account-balance email alerts and overdraft protection. She can get bells and whistles such as mobile bill-payment for an added $2 monthly.
Welcome to a la carte checking, a kinder and gentler way for banks to charge for basic services. By adopting the approach, Frost and another large lender, Union Bank out of San Francisco, are hoping to steer clear of the industry's fee-levying pitfalls such as some rivals' abortive attempts to charge for debit-card use.
As long as the pricing is appropriately upfront and transparent, this type of bank fee structure has the potential to be consumer friendly. Free checking is clearly on its way out at large banks, and I think most people would rather pay for services they use rather than pay a higher price for a bundle of services only a few of which they want.
It could also help bank products compete against prepaid debit cards, which in a way represent the ultimate in basic, low-cost checking.
That being said, the "base rate" for such a checking account needs to be relatively low. Our 2012 Checking Study found the average monthly maintenance fee on a checking account was $5.48, and for most accounts that presumably includes many of the features that have become industry standards such as mobile banking and bill pay. So if you're going to offer a bare-bones account that leaves out some common services, it needs to be significantly cheaper than that to be a good deal.
But therein lies the fundamental problem with "unbundling" services, whether you're talking about checking accounts or cable television. Every bank customer being asked to financially support each feature he or she wants often ends up being more expensive than putting everything together in a bundled account which you sell to everyone.
What do you think? Would you go for a la carte checking at your bank?
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