In the United States, banks have dug themselves a large hole with the structure and complexity of fees. And because their traditional revenue models are being legislated out of existence, it will just get worse before it gets better.
The consumers are miffed and thinking “I’m getting more and more service from companies like Amazon, better products from Apple, but my bank is gaining in complexity and adding fees to more of the things I want to do.”
And the people who are the most price sensitive are hit the hardest by fees. For those consumers who can afford to pay, they are irritated by the complexity of the fees. So even though it may be “noise,” it is irritating noise. Both groups are especially frustrated, given the simultaneous decline in customer service levels.
Today, the Pew Institute reports that a checking account customer may be charged as many as forty-nine different fees. How can anyone anticipate and understand forty-nine different fees? It is too complex. So even if the fees make sense, it is impossible for the average person to remember all the potential fees.
The fees could be reasonable or fair, but the complexity, frequency, and always-evolving fee structure leaves the customer feeling like they are being nickel-and-dimed to death. And users can be informed at fees at different times; when using an ATM you may see one charge at the ATM and yet another charge on your monthly statement. It makes my head spin. I feel like I need a special calculator from outer space to calculate the actual fees I will be charged every month.
Overdraft fees are some of the most painful, since they are more likely to be levied against a tight budget family or individual. In 2011 the average fee was $27.50 for an overdraft but is predicted to increase to $40 or $45 in 2012. In this era of banking by super-computer, it is hard to believe that overdrafts are actually costing the banks more. And all those fees add up; Moebs Services says that bank deposit institutions earned $31.6 billion in overdraft fees in 2011.
According to BankRate.com, monthly fees on some checking accounts can run about $14 a month or almost $170 a year. And even with monthly fees, people can and do experience other fees. Avoiding monthly fees is also getting harder because banks are raising the monthly minimums for no-fee checking.
Banks need to take a time out and rethink the business and pricing model around banking. It is so complex and is a symptom of something fundamentally broken, as we will discuss in future chapters. We must look behind the scenes at banks to understand what is contributing to this increase in complexity, frequency, and increasingly irritating fees.
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