At big banks, closing account could cost you

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(CBS/AP) NEW YORK - Want to close your bank account? It could cost you as much as $55.

In a survey of the practices of the 10 largest banks in the country including Bank of America (BAC), Citibank (C),  JPMorgan Chase (JPM), and Wells Fargo (WFC) policy, advocacy group Consumers Union found that people who want to close their accounts at big banks and switch to a smaller bank can face costly obstacles.

"Banks have added all sorts of fees on basic checking accounts which has raised alarm bells," said Suzanne Martindale, staff attorney for Consumers Union. "But when you hit breaking point and want to move your money, guess what you encounter: more fees."

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Consumers Union said none of the 10 banks will make a free same-day electronic transfer, and all charge for wire transfers or certified checks. Certified checks can cost up to $10 and wire transfers $30.

BB&T (BBT) and Citibank charge a $25 fee if the account is closed within 90 days, while U.S. Bank, HSBC (HBC), and PNC Bank (PNC) charge customers a $25 fee to close an account that has been open for fewer than 180 days.

The survey was commissioned after the public furor over Bank of America's plan to start charging its customers $5 for using debit cards. Bank of America backed off after many organizations, including Consumers Union and Occupy Wall Street protesters, called on Americans to transfer accounts from large banks into smaller community banks.

A survey of customers at the top 10 banks by consulting firm cg42 in November found that one in five customers actively considered switching accounts.

However, Consumers Union soon started hearing from its members that that it wasn't easy to close accounts. Not only did it cost money, but it also cost a lot of time.

Opening a new account at another bank can take a few days or up to two weeks for all the paperwork to be completed.

Re-routing automatic payments and direct deposits into a new account can take four to six weeks and can be a very intimidating and complicated process for some consumers, the group said.

Banks sometimes reopen old accounts after they have been closed by customers.

Chase reopens an account if the bank receives a deposit. Consumers Union said that could easily happen if a direct deposit isn't re-routed in a timely manner. Bank of America's policy is to reopen accounts if any activity hits the account.

These can result in customers owing hundreds of dollars in penalty fees or even a monthly maintenance fee if a deposit falls below what is needed to avoid such a fee, according to Consumers Union.

Consumers are at risk of more penalty fees after they switch banks. If merchants and other billers charge for late payments for delays while re-routing automatic payments, the old bank may charge a fee for overdrafting an empty account or bouncing a check.

The 10 banks surveyed are Bank of America, BB&T, Chase, Citibank, HSBC, PNC, SunTrust (STI), TD Bank (TD), U.S. Bank, and Wells Fargo.

As part of the study, the group sent 16 secret shoppers into branches around the country to ask how to close an account and reviewed online fee schedules and account disclosures, tracked news developments, and collected consumer stories.

[LBFD09100]

Sounds like the American consumer needs to demand that some regulatory effects be placed on the banking institutions if they think they can, well they are, getting away with this kind of attitude. My last dealings with Chase, the bank that "Chased me away form them." I learned that they apparently all decided with in a week or two of each other that they would be imposing all these "cost recovering fees."

[SteveSando]

What a stupid headline! Staying with a big bank can cost you! We switched after we discovered we were paying BofA to make change for us, even when we were doing other tasks like deposits. The manager refused to see me when I wanted to tell him why I was leaving after 20 years.
My experience is smaller banks have lower fees and are more eager to please.
This article feels like it was commissioned by Wells Fargo or Chase.

[Econogics]

The various movements that have recommended closing your accounts with big banks generally say to leave the account open for a few months after transferring to a small local financial institution, precisely to avoid the re-opening of account charges and other annoying fees, and make sure you have caught all the automatic deposits and withdrawals. E.g., http://moveyourmoneyproject.org/

If you leave a few bucks (say $6) in the account, it will remain open, thus avoiding any account closure fees (up to $55? really?). This will become an annoyance over time, and eventually the bank will close the account on you, without notice. At least, that's what one bank did to my savings account a few years ago - where I had an active chequing account. I don't bank there anymore.

Anyway, I recommend leaving the old account open for at least a year, which should capture any annual transactions you may have associated with the account. Leave in enough money to deal with any typical size transactions for you to avoid NSF charges. Once you are confident you have dealt with everything, just leave the account open with a small balance, and no account closing fees either. Just use some common sense regarding making the move, and take your time to avoid unpleasant surprises.

[Jaylah54100]

Makes me so glad I cut all ties with BofA clear back when the "too big to fail" banks were failing.

I'm happily with a local, "small-town" bank now, where I pay no "maintenance fees" on any of my accounts, I use the bill-payer function to pay all of my bills on-line each month (also free), don't even have a check-book but use my MasterCard debit card for local shopping (also free), use the same card at my bank's ATM machines for cash (also free), and use a small credit-limit credit card from them (also free) when shopping on-line.

Of course, I like the fact that my credit card doesn't have a huge credit limit (at my request) because it means that if it is "compromised" it can't be used for high-dollar purchases. And my local bank, unlike BofA, etc., doesn't automatically increase my credit limit without asking.

[sandiegopete]

If you are stupid enough to put your money in a bank these days you deserve whatever you get, or, more likely, don't get from the bank. These days banks exist to take your money and use it for their personnal gambling addiction while paying you 0% interest and if they lose your money too bad for you.

If you absolutely need to have an account use something like a credit union. That is what has taken the place of the traditional bank. All of the big banks these days are nothing but brokerage firms whose one and only purpose is to play markets.

Anyone who has his or her money is a bank like BofA, Wells, Chase, Citi, etc. is a fool. And you know what is said about a fool and his or her money.