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It used to be that all basic (low end) US checking accounts had fees and the concept of no-fees being the norm has happened during my adult lifetime. Low end ac
by gravitas 6y ago
It used to be that all basic (low end) US checking accounts had fees and the concept of no-fees being the norm has happened during my adult lifetime. Low end accounts (no money in them, basic tier) may not cover the yearly expenses for the bank to keep up with the legal paperwork on that account, but a high end account ($$$) has always had no-fees because of exactly what you describe. (digital life has I'm sure reduced said costs)
I work in an unrelated industry where the economics are the same - low spend accounts require more hand-holding (support time = money, etc.) and can be "upside down" (no profit, lossy), whereas large enterprise accounts generate money by their sheer hands-off approach done at scale.
- justinclift 6y ago> yearly expenses for the bank to keep up with the legal paperwork on that account Wouldn't the yearly expenses to keep up any individual account be such a small fraction of a single cent, that we might as well call it zero? Account information is literally just a few strings of bytes, and transaction info is similar. Even with a lot of transactions it'd likely be less than (say) 10kB per year?
- clintonb 6y agoNote: I'm on the board of a credit union. There is no "legal paperwork" for accounts. The only real costs for managing accounts comes from mailing monthly statements. The last time we discussed these statements at a meeting, it was reported they cost about $1.00 (on average) to send.
- chrisseaton 6y agoDo you literally still mail paper statements? Why?
- clintonb 6y agoYes, paper statements must be offered due to federal law. Not everyone has a computer. Like many institutions, we make e-statements an opt-out option for new accounts; however, we still have older accounts that continue to receive paper statements.
- gravitas 6y ago> There is no "legal paperwork" for accounts. ...so I can just throw away all the tax documentation for my mid/high tier interest bearing checking and savings accounts at both my credit union and bank? that share certificate I have at my credit union generating dividends? "Legal" to me means "things I have to do or the police come find me." Your interpretation might be different, but my accounts have legal paperwork.
- justinclift 6y agoIs that "legal paperwork" something which you (the end user) has to do, and not something that the credit union/bank does?
- gravitas 6y agoBoth. Financial institutions (broadening this to cover brokerages as well) produce federally required documentation (it may be digital in 2020, automated) for tax purposes; the most common in my travels is a 1099-DIV (dividend payments) but there are many kinds for all sorts of financial things a bank could/can handle related to investment income. Both parties submit paperwork to the IRS - the institution tracks the assets they're holding/managing and reports it to the IRS on their side; they issue you appropriate documents and you do your taxes and report it using whatever appropriate form. The paperwork is of course dependent on the situation, for the average checking/savings accounts I will guess it's the 1099-DIV as most common - simple interest payments.
- gravitas 6y agoI got that slightly wrong, it's 1099-INT for interest in income on checking/savings, 1099-DIV is for dividends only.
- clintonb 6y agoGood point. 1099s must be submitted to the IRS; however, that is done electronically. The cost, shared by all accounts, is negligible.