Linda Stern of Reuters wrote an interesting news story about banking on March 1st.
Although Bank of America recently backed down from charging its customers $5 each month for access to a debit card, the big banks are planning on dropping some of the customers with smaller balances to meet profit targets in the face of complying with the new requirements of the Dodd-Frank banking regulations.
In 2010, 7.7 percent of customers changed banks. This increased to 8.7 percent in 2011 and 9.6 percent in the last 12 months. One third of large-bank customers said they were leaving due to higher fees.
The Reuters article speculates that banks are getting better at figuring out which customers they can afford to lose and when they can raise fees. Todd Maclin, head of consumer and business banking at JPMorgan Chase told investors this week that customers who don’t have at least $100,000 in investable assets or loans or deposits will usually be unprofitable to banks when Dodd-Frank reform rules are fully phased in. His figures are that one of three customers has less than $5,000 in deposits and assets, and 80 percent of them will be unprofitable to the banks in the future, since Dodd-Frank rules prohibit the current level of charges for overdrafts and similar bank charges.
A young bank customer with a big salary and nice prospects but little money might do better with online banking and investment advice. A wealthy customer who merely wants a neighborhood bank for free checking and bill pay may have trouble finding that combination in the future. The large banks don’t have all the power in this situation, since there are smaller banks, credit unions and automated advisory services, all of whom are seeking depositors.
The article offers some suggestions to bank customers:
http://finance.yahoo.com/news/bank-doesnt-want-204701335.html
Although Bank of America recently backed down from charging its customers $5 each month for access to a debit card, the big banks are planning on dropping some of the customers with smaller balances to meet profit targets in the face of complying with the new requirements of the Dodd-Frank banking regulations.
In 2010, 7.7 percent of customers changed banks. This increased to 8.7 percent in 2011 and 9.6 percent in the last 12 months. One third of large-bank customers said they were leaving due to higher fees.
The Reuters article speculates that banks are getting better at figuring out which customers they can afford to lose and when they can raise fees. Todd Maclin, head of consumer and business banking at JPMorgan Chase told investors this week that customers who don’t have at least $100,000 in investable assets or loans or deposits will usually be unprofitable to banks when Dodd-Frank reform rules are fully phased in. His figures are that one of three customers has less than $5,000 in deposits and assets, and 80 percent of them will be unprofitable to the banks in the future, since Dodd-Frank rules prohibit the current level of charges for overdrafts and similar bank charges.
A young bank customer with a big salary and nice prospects but little money might do better with online banking and investment advice. A wealthy customer who merely wants a neighborhood bank for free checking and bill pay may have trouble finding that combination in the future. The large banks don’t have all the power in this situation, since there are smaller banks, credit unions and automated advisory services, all of whom are seeking depositors.
The article offers some suggestions to bank customers:
- Don’t bundle big money at the same institution just to get free checking
- Bundle little money, say $2,000 or less, to get free checking.
- Use automated investment services like FolioInvesting, Marketriders, Betterment or Wealthfront.
- Don’t hesitate to complain if you feel wronged. The Consumer Financial Protection Bureau is accepting complaints about bank accounts at its web site.
http://finance.yahoo.com/news/bank-doesnt-want-204701335.html
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