Regulation

The Long, Slow Death of Free Checking

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Bank of America is back at it, trying to figure out a way to make money on small checking accounts without bringing on the wrath of overzealous regulators—or customers who feel entitled to the free checking they have enjoyed since the 1980s.

The bank is experimenting with different fee structures in Arizona, Georgia, and Massachusetts for customers who have low balances, prefer in-person banking and dead-tree monthly statements, and don't use other products offered by the bank, such as mortgages or credit cards.

Such customers (read: poor people) cost the bank money, but they used to enjoy the perks of the rich because the bank hoped to capture their brand loyalty now and make more money off of them later.

So what happened? A reminder, from today's Wall Street Journal:

The fee experiments exemplify some unintended consequences of the 2010 Dodd-Frank financial-regulation overhaul, which clamped down on certain revenue sources of banks and motivated them to seek ways to make up the difference.

J.P. Morgan Chase and Wells introduced new account structures in 2010 and 2011 that imposed monthly maintenance fees unless customers maintained certain minimum balances or hit preset monthly deposit levels. J.P. Morgan said Tuesday that 70% of customers with less than $100,000 in deposits will become unprofitable for the bank because of new regulations, such as caps on overdraft fees.

At this rate, fee-free banking will soon the be province of the 1 percent. Say it with me now: "You Can't Call It an Unintended Consequence If You Knew It Was Going to Happen."

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  1. Foreseeable consequences are not unintended.

    1. Can’t be said enough.

      1. Approves this message.

        1. Hardiness Zones
          See Changes From 1990 to 2006
          http://www.arborday.org/media/map_change.cfm

          1. ..since 1998, douchebag.

            1. The [deliberate liar’s] argument…It hasn’t warmed since 1998

              What the science says…

              The planet has continued to accumulate heat since 1998 – global warming is still happening. Nevertheless, surface temperatures show much internal variability due to heat exchange between the ocean and atmosphere. 1998 was an unusually hot year due to a strong El Nino.

              What has global warming done since 1998?
              http://www.skepticalscience.co…..ediate.htm

    2. So the US intended to kill thousands of Afghan civilians when it invaded.

      1. Well, when it decided to stay and nation-build, I would say that was definitely a foreseeble consequence.

        If you intend to do something, then you also intend that all the foreseeable consequences of that action come to pass, good and bad. You may just want the good things, but that doesn’t change your responsibility for the bad things.

        1. How are you handling the personal responsibility for causing birth defects and asthma and other known harms to victims with your tailpipe exhaust?

          Oh, you’re not?

          1. First prove that it’s MY tailpipe exhaust doing it.

            1. Starts with bullshit like Brian D’s.

        2. IOW Bad decisions aren’t mistakes.

          http://www.theminimalists.com/mistakes/

    1. And now there’s no more free lunch to forage.

      “You’ll know you’re among the people of your culture if the food is all owned, if it’s all under lock and key. But food was once no more owned than the air or the sunshine are owned…and putting it there is the cornerstone of your economy, because if the food wasn’t under lock and key, who would work?”

      “The agricultural revolution just consisted of doing something full-time that people had been doing part-time for thousands of years. The real innovation of our revolution wasn’t growing the food, it was locking it up. Your revolution would have ground to a halt without that feature. It would grind to a halt today without that feature. There’s only one way you can force people to accept an intolerable lifestyle. You have to lock up the food.”

      ~Daniel Quinn
      http://www.ishmael.com

      1. What percentage of the world’s current population could be sustained by hunting-gathering?

        1. Don’t feed the troll. It prefers to forage.

          1. Don’t feed the troll

            You just did. Troll.

          2. Don’t argue with them; because their intellect is superior.

            And we Fibertarians don’t want to make asses of ourselves.

            Da, Comrade Fibertard.

            1. Then answer the fookin’ question.

              1. Archaeologists studying the rise of farming have reconstructed a crucial stage at which we made the worst mistake in human history. Forced to choose between limiting population or trying to increase food production, we chose the latter and ended up with starvation, warfare, and tyranny.

                The Worst Mistake in the History of the Human Race
                by Jared Diamond (UCLA School of Medicine)
                Originally published in Discover Magazine, May 1, 1987. Pages 64-66.

        2. I suppose that would depend on how we optimized the environment for hunting and gathering.

        3. With agricultural city-Statism, we can feed the richest half of 7 billion souls with shit that causes Diseases of Civilization.

          Now that’s Utilitarianism. To a Fibertarian. I guess. LOL

      2. Fine, give all your food away.

        1. That’s exactly how Non-State society does it, Sam.

          Sharing amongst a group thus ensures food for everyone. It also helps guarantee safety from predation. Cooperation helped primates increase the food they obtained, and decrease the occurence of becoming food themselves.

          Thesis #7: Humans are best adapted to band life.
          ~Jason Godesky
          http://theanarchistlibrary.org…..heses.html

          1. But you’re talking of a world were one alpha male, some beta males and a harem of females live in extended clan groups. They then battle fiercely with other primates that come into their territory. When alpha males die, the clan is torn asunder as younger males battle to become new alphas themselves.

            It is a world of fear and illicit sex.

            But you’re right, they do share food amongst the family.

  2. Look for new government mandated free checking in 2013 if Obama gets back in.

    1. First Unintended Consequence: Unprofitable banks go out of business due to new mandate.

      Second Unintended Consequence:
      People affected by the bank closures clamor for the government to “do something.”

      Third Unintended Consequence:
      The Federal Government sets up its own banking institution at taxpayers’ expense.

      Fourth Unintended Consequence:
      The banks that didn’t close earlier can’t compete with the new Federal Bank and have to close and/or be consolidated by the new Federal entity.

      Fifth:
      The government now has easy and immediate access to everyone’s banking and transaction information and history.

  3. Not to throw cold water on the subject, but is it really just a reaction to Dodd-Frank?

    If I ran a capital-impaired bank, one thing that would have to be done is reduce liabilities – read: customer deposits.

    Free checking is dying mostly because these zombie banks are being kept alive in the first place. If the government wasn’t propping them up, all the banks mentioned in the post would no longer exist and customers would have moved their deposits to other institutions already. (Assuming the government didn’t allow the customer funds to be stolen a la MF Global.)

    1. We’d have seen some interesting innovations as the surviving major and mid-tier banks struggled for supremacy–if we’d let the failures fail.

      Naturally, we have the usual government-mandated mess instead.

    2. Surprisingly, one of the regional banks here has gone the opposite way of the big banks. They recently rolled out what they call “asterisk-free” checking. Not only is there no minimum requirement but they will even waive the overdraft fee if you put the money in your account within 24 hours. The bank is doing very well, too.

      1. Which bank is this? I’m thinking of paying a visit.

        1. Probably Huntington Bank; I’m assuming they have a trademark on the “Asterisk Free” label.

      2. There’s always credit unions. I’ve been away from banking for a while, but they seemed to have many advantages (regulatory and in the market) over banks and thrifts.

        1. Im very happy with my bank, but if/when BB&T screws me over, I will be at a credit union immediately.

  4. When you squeeze a water balloon…

  5. OT: This is interesting. A federal judged blocked new x-large cigaretter warning labels on 1A grounds.

    The Wall Street Journal (3/1, Esterl, Subscription Publication) reports that US District Judge Richard Leon in Washington, DC, on Wednesday blocked a plan by the Food and Drug Administration that requires graphic warning labels on packs of cigarettes. Judge Leon ruled in favor of tobacco firms who argued that the FDA violated their constitutional rights to free speech by requiring the large labels. Judge Leon had issued a temporary injunction against the labels in November, and experts at the time predicted he would rule in favor of the tobacco companies.

    For your hat tip, that would be “inexorable commenter R C Dean”.

    1. It’s already compelled speech. Is the rationale it’s extra-compelled?

  6. I still have free checking at ING Direct. But ING Direct got bought by Capital One, so I can’t imagine free checking long for this world.

    My husband became apoplectic when he learned that ING was the recipient of bailout funds and was forced as a condition of the bailout to sell the American retail banking arm. Now we’re shopping for a non-evil bank. Ugh. I wonder if such a thing even exists.

    1. I do most of my banking at TransPecos Banks, a small bank in the middle of nowhere that gives pretty good interest (better than ING) and lets you use it all over the country if you meet certain conditions (use their card 10 times a month and direct deposit).

      1. TEN times a month!!??

        Outside of regular monthly bills, I don’t think I make ten purchases a month. (I’m not counting sub $10 purchases which I will NEVER conduct in anything other than cash.)

        1. I was worried about that, but we go to the grocery store about 4 times a month, get a train pass once a month, etc. It ended up not being a problem. It’s pretty easy with a tool like Mint.com to check how many purchases you make a month.

    2. Keybank but they’re a regional bank in Ohio and the Northeast

      1. As opposed to Key Bank, in the northwest (and presumably other locations)? You know, the one Key Arena in Seattle was named after?

        Pretty sure Key is a “big”, nationwide bank.

    3. If by non-evil you mean “does not benefit from crony capitalism”, then you are going to have a long search ahead of you.

      1. I’m tired of True? Capitalists making up excuses like the True? Communists, and denying the reality of what their glorious system actually produces.

      2. didn’t the government force some banks to take the money even if they did not want it?

        1. In ING’s case it was the Dutch government that did the bailing out, so I don’t know what the conditions were, other than the forced divestiture.

        2. BB&T, for one.

          They werent the only one.

    4. If one does, it will inevitably get acquired by an evil one anyway.

    5. Does a one-branch bank located in really-small-town Iowa that provides free checking and unlimited free ATM-withdrawals & debit-charges count as non-evil?

    6. Try a credit union.

      1. Been there, done that. Hated the shitty employees, the hours, the fees, and the lack of accessibility. Plus the emeffers wouldn’t send us our car title when we paid off the note.

    7. USAA does pretty well by me.

      1. This. Agreed.

      2. Roger that.

      3. Thirded.

    8. I hear good things about BB&T, including that they were vociferously opposed to the bailouts, support Randian academic programs, and won’t lend money to eminent domain projects. Anyone have any personal experience with them?

      1. They bought out Bank of Louisville more than a decade ago. I stuck with them thru the change and havent left. Had my mortgage with them for a while too.

        They are reasonably competent. Which is about as high praise as I will give a bank. Plus, all over the SE, so I have access to ATMs when I am in Atlanta.

  7. J.P. Morgan said Tuesday that 70% of customers with less than $100,000 in deposits will become unprofitable for the bank because of new regulations, such as caps on overdraft fees.

    I honestly don’t understand this.

    Are they seriously saying that they can’t make enough money on JUST THE FLOAT of having a bunch of 50 grand accounts they pay no interest for?

    Customer walks in door – hands them 50 grand – doesn’t want any interest, gets 0% – just wants a paper statement once a month – and that’s SO EXPENSIVE TO DO that they can’t make money off that customer?

    That’s insane.

    1. I don’t get it either. My feeling with these things is that people on the right are a little to eager to swallow whatever the banks are selling.

      Was free checking really that free? Instead of the up front fees paid now people were just paying hidden fees. What’s so great about hiding info from the consumer. I’ll never forget my experience opening a free checking account with no mimum balance. I deposited $60 and let it sit for more than a few months. Next time I check it the balance is -$15. Bank changed the terms at some point and instituted a minimum. I hadn’t even had the account for a year!

      1. Bank changed the terms at some point and instituted a minimum.

        It’s called “read your statements”.

        1. I know. My fault. I shouldn’t have thouight my money was safe in a bank.

    2. I wonder if JPM has some ulterior motive for saying this.

  8. Say it with me now: “You Can’t Call It an Unintended Consequence If You Knew It Was Going to Happen.”

    You are, once again, conflating intent with foreknowledge. Not remotely the same thing.

    Libertarians, for instance, are aware that implementing their system of government would result in some people dying for lack of food or medical care. Does that mean we intend for those people to die?

    1. How are you aware of this?

      1. Are you claiming that removing the welfare system from government will not cause anyone to suffer?

        1. “will not cause anyone to suffer?”
          Compared to:
          “would result in some people dying for lack of food or medical care.”
          Damn! Bring that goal post right back!

    2. Actually, yes.

      I think it’s fair to say that if we know that a consequence will result from an action, and we make a positive decision of intent to make that action, then we “intended” the consequence.

      It all depends on what you believe the moment of “intent” involved in your act of will entails. It’s not unreasonable to assert that it includes everything you foresee resulting from your action.

      That’s not the same as accepting moral blame for the consequence, though.

      1. I think it’s fair to say that if we know that a consequence will result from an action, and we make a positive decision of intent to make that action, then we “intended” the consequence.

        Not by the usual definition of “intend”. Intent requires that you WANT the consequence to follow the action.

        The actual thing that RC and KMW are trying to say is correct — that the badness of unintended but foreseeable consequences must be weighed against the goodness of the intended consequences in determining whether an action should be taken.

        However, that’s not as pithy and doesn’t put one’s opponents in as bad a light, so we know how that goes.

        1. Intent requires that you WANT the consequence to follow the action.

          The Iron Law is play on the meaning of “intent”, granted. “Intend” doesn’t only mean “desired” or “wanted”.

          In legal circles, it applies not so much to the results of a given action, but to the action itself. You are responsible for all the (reasonably foreseeable) consequences of your intentional actions.

          From that angle, the notion of an “unintended consequence” is simply a non sequitur, designed to avoid responsibility. The real issue is whether the consequences for which you are trying to avoid responsibility are foreseeable or not.

          Foreseeable consequences are always consequences for which you are responsible. Saying they weren’t what you wanted makes no difference.

          1. Now you’re conflating intent and responsibility. Again, very different things.

        2. However, that’s not as pithy and doesn’t put one’s opponents in as bad a light,

          Yes, I do in fact want to put people who try avoid responsibility for the harm done by their actions in a bad light.

          Are you saying this is a bad thing?

          1. I don’t think it’s a responsibility thing either, though.

            If I’m a partisan in 1943 Czechoslovakia, I know in advance that if I assassinate the local SS officer, the SS will shoot a bunch of people in retaliation.

            I think you can’t say that when I make the decision to proceed with my assassination, I’m not ‘intending’ the entire subsequent sequence of events which I have already foreseen.

            I’m still not morally responsible for what the SS does, though. That’s all on them.

            Similarly, I think I have to concede that I know in advance that if Libertopia comes some people will do stupid shit and suffer as a result. But that’s not the same as placing moral responsibility on myself. If people do stupid shit and suffer, it’s their own damn fault. All I’m doing is stepping back out of their way.

            1. The real problem with your example is that the now-dead SS officer will be replaced with a new recruit.

              You need to shoot “potential” SS officers because the current SS won’t retaliate on their deaths. A 13-year old who wants to grow up to be an SS officer is the one that needs to be converted into an SS non-supporter.

            2. I love me some philosophy. Probably why I majored in it.

              What’s the difference between killing someone knowing someone else will therefor kill ten innocents, setting off a bomb to kill someone, knowing ten innocents will die, and just shooting ten innocents on the way to your target?

              One difference, of course, is that there is an intervening actor in the first case: the SS guys who actually do the shooting.

              OK, so does that mean that the officer who orders that ten innocents be killed is in the same place as the partisan who assassinates someone?

              No. So its not just “someone else pulled the trigger.”

              Still, I wouldn’t be so quick to excuse the partisan from any moral responsibility. Those are people who died “because of” (in some non-trivial sense) what he did.

              1. Imagine that you are a neutral in the conflict. Everyone knows the SS will kill ten people if one of theirs is killed.

                The partisans do it anyway. Is it wrong of you to blame the partisans as well as the SS when your kid winds up in the mass grave?

                Or this: Is it wrong for a partisan to respond to the SS policy by laying down arms? Why not, if he has no responsibility at all for what they do?

        3. One of the definitions of intend is “to design or destine”. I think forseeable consequences fall under that defintion.

          1. No, they don’t. You know what “design” means, no?

            My S&W 22A tries to fly apart to the four corners of the room every time I remove the barrel. I don’t think it was designed to do that, but it was certainly foreseeable.

  9. OK you have to admit dude that is just downright annoying, Seriously? Wow.

    http://www.Went-Anon.tk

  10. dead-tree monthly statements

    Can’t you just say “paper” statements without the silly, snarky meme?

  11. Concerning the article in The Atlantic, it says “More than half of all checking accounts are currently unprofitable, according to a report issued last month by Celent, a unit of Marsh & McLennan Cos. It costs most banks between $250 and $300 a year to maintain one of the roughly 200 million checking accounts, according to industry estimates.”

    How on earth can it cost $250-$300 per year to maintain one account in a database and perhaps clear a few dozen checks?

    1. “How on earth can it cost $250-$300 per year to maintain one account in a database and perhaps clear a few dozen checks?”
      I don’t find this surprising at all.
      Overhead; IT costs, regulatory compliance, advertising, rent, etc, etc, spread over X accounts.
      $3C/annum is $0.82/day. Nope, not hard to see at all.

      1. I used to work in Property & Casualty Insurance. Between 10-20% of premiums went to regulatory compliance.

      2. Plus the fact that the assets are severely under-performing. When the assets were highly profitable, those costs were spread over the loan accounts. Now that the loans don’t make much money the costs get spread over the deposit accounts, too.

      3. Except they would have to pay for it regardless, unless BOA or any other bank is planning Massive layooffs due to downsizing EVERYTHING.

      4. So they’re including the fixed costs. If that’s the case then shedding these accounts will drive down the profitability of the high-value accounts.

  12. If we can just reverse Greenspan’s decision that allowed banks to sweep money from checking accounts into savings accounts (unbeknown to customers) so that banks could lend out more of those deposits.

  13. I’m not so surprised that B of A is doing this, but moreso that so many of their customers are willing to put up with it.

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