Andrew Johnson at American Banker informs us that JPMorgan Chase has ended its somewhat controversial testing of higher ATM fees for noncustomers in Texas and Illinois:
The trial concluded at the end of March, said the spokesman, who declined to give a reason or say whether JPMorgan Chase is looking at testing higher ATM fees in other states. The fees in Texas and Illinois have gone back to $3 for noncustomers.
JPMorgan Chase and other banks have made changes in anticipation of pending caps on debit interchange fees.
It's funny how much influence an arbitrary price point like $5 can increase consumer resistance to a price hike. Contrast that with Bank of America's decision to raise its monthly fee on checking accountholders who don't have a monthly direct deposit of at least $250 from $8.95 to $12 a month. That little change will cost the likely thousands of customers who fall in that category $36.60 a year apiece.
To equal that fee hike over a given year, you'd have to visit a high-priced JP Morgan ATM, rather than the average ATM, 18 times. Yet I doubt we'll see similar levels of outrage for the BofA move. That extra $3 just doesn't look as threatening on a bank statement as it does staring back at you from a little glowing screen when you take out money.
This illustrates how important perception is when it comes to banks' decisions to raise fees. It's why banks like to bury fees within disclosure documents that are a median of 111 pages long, according to a new study by the Pew Charitable Trusts. And why the same study shows banks use seven different terms for overdraft fees. And why a recent Public Interest Research Group study found that nearly half of bank branches contacted failed to comply with federal regulations requiring them to keep fee schedules on hand for customers.
All of that isn't because banks are inherently nefarious or enjoy hiding things from customers, it's because experience has taught them that customers don't, in the main, really care that much about fees or fee hikes as long as they're not of the in-your-face, noticeable variety. If customers did care about fees, they would pay more attention to them when shopping for a new checking account, and all bank branches would be forced to stock fee schedules to hand out because customers would demand to see them.
On some level, I think banks probably see this situation as something of a win-win: Customers don't have to deal with the annoyance of knowing what they're paying to have a checking account and banks can charge a fee they consider reasonable without getting flack from customers or losing business to their competitors.
This notion is born out in some ways by the J.D. Power study I blogged about a few weeks ago. That study found customer satisfaction with banks was rising, despite a lot of banks phasing out free checking and raising fees, ostensibly to compensate for profits lost because of new bank regulations. J.D. Power director of banking services Michael Beird concluded customers weren't getting annoyed because banks in general were doing a better job providing value in exchange for fees.
That may be part of it, but I think another factor may be banks have gotten really good at charging fees in such a way as to avoid being noticed, let alone singled out by customers as annoying. Thanks to the rise of debit cards, most people's checking transactions have become a lot more frequent. It's easier to hide a new fee on one line of a three-page statement than it is on an ATM screen that says, in effect, "Do you agree to pay $5 to take out $20 of your own money?"
In a way, banks' "hear no evil, see no evil" preference sums up the current debate over the Durbin amendment and interchange fees. Regardless of how the issue is ultimately decided by Congress, consumers will pay the fees, but under the status quo, the fees are rolled into the price of merchandise, rather than being itemized on a bank statement.
I'm not saying banks are wrong for trying to make money off of providing check accounts. They can and should charge whatever they want for the services they provide. I'm just saying, don't be surprised if they do it in subtle, hard-to-notice ways, because Americans have consistently shown a preference for that. For most Americans, the way in which fees are raised is far more important than the amount they end up paying in aggregate.
What do you think? Is perception reality when it comes to fees? Do you care about fees?