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Wednesday, October 20, 2010

Say goodbye to traditional free checking

I mean it's not as if I use checking anyway. Although I wonder if this will affect the small banks because this story seems to focus on these prevalent megabanks we have come to know over the years. Here's how Bank of America is dealing with this change:

Bank of America, which does business with half the households in America, announced a dramatic shift Tuesday in how it does business with customers. One key change: Free checking, a mainstay of American banking in recent years, will be nearly unheard of.

"I've seen more regulation in last 30 months than in last 30 years," said Robert Hammer, CEO of RK Hammer, a bank advisory firm. "The bottom line for banks is shifting enormously, swiftly and deeply, and they're not going to sit by twiddling their thumbs. They're going to change."

In the last year, lawmakers in Washington have passed a range of new laws aimed at protecting bank customers from harsh fees, like the $35 charged to some Bank of America customers who overdrafted their account by buying something small like a Starbucks latte.
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So Moynihan ended overdraft charges on small debit card transactions. He says the rate of account closings have since dropped 27 percent.

To make up for lost fees, he also started thinking of new products. In August, the bank introduced a new "eBanking" account, where customers were offered a free checking account if they banked online. The catch: If they opt for paper statements, or want access to tellers for basic transactions, they would be charged a monthly fee of $8.95.

"Customers never had free checking accounts," Bank of America spokeswoman Anne Pace said. "They always paid for it in other ways, sometimes with penalty fees."
I said I wonder how these changes could affect the smaller banks, the neighborhood banks. Here it is:

Michael Moebs, the founder of Moebs Services, said it is now up to the smaller Main Street banks to see an opening and grab customers from the big banks.

"Free checking could become a mainstay of community banks and credit unions in the future," Moebs said.
 This article is worth a good read!

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