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New Bank Fees: Will They Make You Walk?

The relationship between banks and consumers is beginning to feel a lot like an expensive game of Whac-a-Mole. The 2009 CARD Act dealt a blow to banks' ability to levy stiff credit card fees, and the 2010 Dodd-Frank financial reform bill threatens to impose limits on fees banks can charge for processing debit-card transactions. By one new estimate, banks are staring at annual revenue losses of $25 billion as a result of these regulations.

So it was just a matter of time before the banks popped up with new fees to offset those potential losses. J.P. Morgan Chase recently introduced monthly checking account fees ranging from $10-12, while Bank of America is testing out similar monthly fees for certain accounts in select states. And the banks aren't stopping at checking account fees. Chase is also testing out a stiff $5 fee for any out-of-network ATM transactions, and annual fees for credit cards are becoming more common.

Yet a new survey from Bankrate suggests banks might want to be a little careful how aggressively they play this game. Nearly two-thirds of consumers recently surveyed said they would consider bolting their bank if they were slapped with higher checking account fees. Interestingly, 75 percent of respondents with incomes of at least $75,000 said they would consider walking. "The financial community has spent boatloads of money trying to attract the mass affluent; this survey suggests they are now at risk of alienating those very people," says Greg McBride, senior financial analyst at Bankrate. "They are going to have to walk a fine line."

Indeed, banks are betting that we're too lazy or busy to actually follow through. There's a big difference between saying you'd consider walking, and actually taking the time and effort to make the move. Just the thought of changing the direct deposit and having to close down the old auto-pay or bill pay account at one bank and set it up at another is a pretty big disincentive to switching. Indeed, in a recent presentation to shareholders, the head of Chase's retail financial services said the bank has already converted 8 million free checking accounts into revenue streams now generating $10-$12 in monthly fees. That's about $1 billion of inertia right there.

If you've suddenly been hit with new basic checking fees, here's a plan of attack if you're looking to whack back:

  • Check what it takes to get the fee waived. For example, in markets where Bank of America is testing new monthly fees of up to $25, it exempts anyone with a $5,000 balance. Of course, earning bupkus on $5,000 is a hidden fee of sorts; if your bank has a high balance requirement for free checking, at the very least look into moving some of it into a money market or CD that gets you at least a teeny bit more yield.
  • Tell 'em you're leaving. Hey, this is all a big experiment, so it doesn't hurt to threaten to leave, and see what the bank says. You never know. And that one call or online chat is worth not having to do the setup work for a new account.
  • Take a walk. Look, the good news here is that we've progressed from an old fee model that preyed on your laziness and random "surprise" fees, such as overdrafts, late fees etc., to a more transparent new model: Bank with us and we're gonna charge you a monthly account fee. If you don't like that fee, time to shop for a new place for your checking and savings.
  • Move your money to an online bank or credit union. MoneyWatch's Jane Bryant Quinn recently pointed out that free checking is indeed alive and well at online banks, credit unions, and often smaller community banks.

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