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A seismic shift for banks, bankers and banking | OPINION
A new charge showed up on my bank statement. I hadn’t done anything differently, I deposit money, write a few checks. So what had changed that warranted a $4.95 charge? Actually, nothing had changed except for the bank deciding that some small service would no longer be free. Okay, that’s fair, but only if one uses that service. I don’t.
I now bank with one of the Big Three. My Marysville bank of days of yore had been swallowed by a larger one that was later taken over by one of America’s Uberbanks. Of course the rules changed with each tumultuous change of ownership were engineered to pad the bottom line for whoever signed the papers.
Local banks are teetering and tumbling. After the feds served Cascade Bank with a cease-and-desist order, Cascade was taken over by Opus Bank of Irvine, CA. First Heritage Bank also earned a C&D order for unsound banking practices and was assumed by Columbia State Bank. After North County Bank stalled because of yet another C&D order, it was snapped up by Whidbey Island Bank. Horizon Bank’s C&D order led to its acquisition by Washington Federal. Evergreen Bank followed the downward trend and was purchased by Oregon’s Umpquah Bank. And Frontier Bank is struggling under a Cease and Desist order. Ouch.
Bank profits took a big hit when the realty market imploded and another hit when the Feds clamped down on certain of their “creative” loan and financing practices. Oh, how the big banks suffer. Goldman-Sachs was forced to trim employees’ salaries so severely that the average employee’s fell to a paltry $292,000. How’s that for tightening the belt?
Feeling the pinch, the finance industry rose to new levels of creativity. Say you have an account balance of $500. At the end of the month you write three checks, one for $30, another for $50 and the last for $495. Banks have taken to rearranging the arrival times of the three checks so that the $495 draw all but empties your account. Then the other two checks will each draw a $45 overdraft charge instead of just one, had the $495 check not been posted first.
Time was when banks got by on an industry-standard menu of logical charges. Now, according to the Federal Deposit Insurance Corp., about 42 percent of banks’ annual revenue comes from non-interest income which is mainly from add-on fees. That percentage is up from 34 percent one decade ago. And climbing.
It’s time for me to have a sit-down with an officer of my bank. I’m going to hand her (banking seems to have become a girls’ world) a check-list to see where my bank stands on services that once were offered gratis but now carry fees. For instance:
- Overdraft fees.
- ATM withdrawal fees.
- Automatic overdraft protection. Instead of denying withdrawals from empty accounts, banks now issue the money plus a whopping charge.
- Account statement fee.
- Activity fee. (This one can mean just about anything.)
- “Bank fees” for things like deposit slips, counter checks and notary services.
- Administrative fees.
- Additional checks fee.
- Large cash deposit fee.
- Annual account maintenance fee.
- Transaction fee.
- Use of teller fee.
- Minimum balance fee.
- Stagnant account fee.
A print-out of Bank of America’s full list of fees runs eleven pages in length. Its customers must pay $3 to lay hands on canceled checks. If you call the bank more than six times, your next calls will cost $1 each. If Wells-Fargo’s robo help-line doesn’t do the job, you’ll pay $2 to talk with a human. A money-order from Citibank will cost customers $5. To stop a check, Citibank charges $30. To show how completely out of whack things have become, the nation’s total fees charged for overdrafts topped $17.5 billion last year although those fees were attached to only $15.8 billion in overdrafts.
In contrast, there are good little banks in our area, Skagit State Bank for one. A few dodged the housing bubble by sticking to conservative ways to emerge on sound footing. A check will show that most of these rock-solid local banks depend less on fees.
Credit unions have come out of the mess smelling like roses, largely because deregulators hadn’t granted them the same right to gamble accorded to bankers. Further, the percent interest charged by credit unions for overdue Visa or Master balances is typically half or less that charged by Big Banks. The only downside to transferring one’s banking to a credit union is that credit union offices are typically bunched close to their points of origin. That means it may cost to access your account when traveling.
Greed, questionable practices and excess have moved many to transfer accounts to local financial institutions that offer little more than traditional banking services. No nuisance charges, no brokerage gambling, no multi-million dollar execs. This may be the dawning of a new day for banking and it can’t come too soon.
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