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I agree there should be less regulatory hurdles for credit unions. Unfortunately this would require essentially some form of deregulation which is unlikely in t

by bko 11y ago

I agree there should be less regulatory hurdles for credit unions. Unfortunately this would require essentially some form of deregulation which is unlikely in this political environment. Banks don't charge outrageous surcharges and fees to be evil. They do it because providing banking services, especially to small accounts is expensive. In 2011 an average checking account cost $349 for a bank to maintain [0]. Anytime there is an attempt at more transparent pricing or discouraging small customers there is a huge backlash for the public and regulatory bodies like financial protection bureau. Bank of America tried charging a $5 monthly debit fee for accounts less than $5k, 2011 only to drop it shortly after hundreds of thousands of petitions came in opposing the idea. Thr consumer protection agencies would have probably shut that down anyway by fiat. I understand why a credit union is appealing to some but I personally don't care whether my services are provided by a for profit company. I give my business to the organization that can provide me the best value. Walmart shareholders can keep their 5% pretax margin. [0] http://www.americanbanker.com/issues/176_238/checking-account-free-checking-debit-fees-1044756-1.html http://www.americanbanker.com/issues/176_238/checking-accoun... Edit: I get it, it appears as though I'm defending the big banks. I just think an explanation as to the high fees is better than blind populist response of claiming the banks are somehow evil. Or the response that any organization that earns a profit is evil.

humanrebar 11y ago
> In 2011 an average checking account cost $349 for a bank to maintain From the article: "The single biggest cost, Israel says, is the cost of bank branches and ATMs. Another 20% is spent on back-office functions, including maintaining call centers and payment operations." It seems like this is all about bad workflows and customer service... which are technical issues, not inherent business needs. There are probably technical solutions to these problems that would drive the cost per customer down dramatically. Perhaps going forward, there will be more incentive to innovate on this front. ...or maybe there's enough regulation out there that it doesn't really matter.
- TorKlingberg 11y ago
  Sure, you could run a bank with no branches and no support phone number.
  - cmdkeen 11y ago
    There are several online banks in Europe that don't have branches.
cwmma 11y ago
A corporation at the end of the day has it's owners interests at heart, with a large bank like Bank of America their owners and their customers are separate groups and their interests may be odds. When the customers AND the owners are the same interests tend to align and you are less likely to be in a situation where you feel your bank does not have your best interest at heart.
- bko 11y ago
  Can you expand? It's easier now that ever to switch and compare banks. It's fairly competitive. But my original point was that the banks are losing a lot of money on small accounts, so obviously they're not trying to compete for them and merely offer and service those accounts due to pressure of regulators and to earn public good will.
rahimnathwani 11y ago
That $349 figure is misleading. It is comprised almost 100% of fixed costs, like executive salaries and buildings, which do not vary with the number of accounts. Banks charge fees because they seek to maximise profits. Those fees don't have to relate closely to costs. I'm not saying this is good or bad, just that it is so.
- bko 11y ago
  I don't know if you read the website or want to provide some kind of source for the cost breakdown, but my source suggests it's 50% branches and arms, 20% call centers and payment, 20% security and compliance and 10% product development and sales. I guess you can call those fixed costs. No mention of executive salaries, maybe product development? If they were just fixed costs, and banks were making money off small accounts, why are they discouraging them so much with minimum balances and fees? I cancelled a small account recently and the bank seemed happy to let me go. Not even a question of why I was leaving.
  - rahimnathwani 11y ago
    > No mention of executive salaries From the article you linked: "Overhead costs, including executive salaries along with security and compliance expenses, also account for about 20% of the costs." I'm not saying that the marginal cost of maintaining an additional account is zero. I'm just saying it's closer to zero than it is to $349/year.
colanderman 11y ago
Banks don't charge outrageous surcharges and fees to be evil. Yes they do. It's very common for commercial banks to intentionally order transactions which cause an overage such that they result in the highest amount of fees possible, and then charge an extra fee because you couldn't cover the overage fee. If this were simply banks trying to be profitable, why wouldn't they simply raise overage fees and charge them predictably? Is there a regulation which disallows this? Sorry, I'll stick with keeping my money with an institution that's not legally bound to engage in an adversarial relationship with me.

by bko 11y ago

humanrebar 11y ago

> In 2011 an average checking account cost $349 for a bank to maintain From the article: "The single biggest cost, Israel says, is the cost of bank branches and ATMs. Another 20% is spent on back-office functions, including maintaining call centers and payment operations." It seems like this is all about bad workflows and customer service... which are technical issues, not inherent business needs. There are probably technical solutions to these problems that would drive the cost per customer down dramatically. Perhaps going forward, there will be more incentive to innovate on this front. ...or maybe there's enough regulation out there that it doesn't really matter.

TorKlingberg 11y ago
Sure, you could run a bank with no branches and no support phone number.
- cmdkeen 11y ago
  There are several online banks in Europe that don't have branches.

cwmma 11y ago

A corporation at the end of the day has it's owners interests at heart, with a large bank like Bank of America their owners and their customers are separate groups and their interests may be odds. When the customers AND the owners are the same interests tend to align and you are less likely to be in a situation where you feel your bank does not have your best interest at heart.

bko 11y ago
Can you expand? It's easier now that ever to switch and compare banks. It's fairly competitive. But my original point was that the banks are losing a lot of money on small accounts, so obviously they're not trying to compete for them and merely offer and service those accounts due to pressure of regulators and to earn public good will.

rahimnathwani 11y ago

That $349 figure is misleading. It is comprised almost 100% of fixed costs, like executive salaries and buildings, which do not vary with the number of accounts. Banks charge fees because they seek to maximise profits. Those fees don't have to relate closely to costs. I'm not saying this is good or bad, just that it is so.

bko 11y ago
I don't know if you read the website or want to provide some kind of source for the cost breakdown, but my source suggests it's 50% branches and arms, 20% call centers and payment, 20% security and compliance and 10% product development and sales. I guess you can call those fixed costs. No mention of executive salaries, maybe product development? If they were just fixed costs, and banks were making money off small accounts, why are they discouraging them so much with minimum balances and fees? I cancelled a small account recently and the bank seemed happy to let me go. Not even a question of why I was leaving.
- rahimnathwani 11y ago
  > No mention of executive salaries From the article you linked: "Overhead costs, including executive salaries along with security and compliance expenses, also account for about 20% of the costs." I'm not saying that the marginal cost of maintaining an additional account is zero. I'm just saying it's closer to zero than it is to $349/year.

colanderman 11y ago

Banks don't charge outrageous surcharges and fees to be evil. Yes they do. It's very common for commercial banks to intentionally order transactions which cause an overage such that they result in the highest amount of fees possible, and then charge an extra fee because you couldn't cover the overage fee. If this were simply banks trying to be profitable, why wouldn't they simply raise overage fees and charge them predictably? Is there a regulation which disallows this? Sorry, I'll stick with keeping my money with an institution that's not legally bound to engage in an adversarial relationship with me.