Bank of America and the End of Free Checking

When Bank of America announced that it was getting rid of it’s free eBanking checking account, the social media backlash was both swift and furious, with thousands of consumers threatening to take their business elsewhere. Now's the time for community banks and credit unions to pounce.

Bank of America has been phasing out its no-maintenance fee eBanking account for a while, but in January 2018 they finally decided enough was enough and pulled the final plug on the product.

BofA’s eBanking account waived an $8.95 monthly maintenance fees if two main conditions were met: (1) customers had to receive eStatements, and (2) customers had to make deposits and withdrawals using self-service options. With eBanking, customers would have been charged the $8.95 fee if they went into a BofA branch to make a deposit or withdrawal, but once the customer incurred the fee, they could have made unlimited deposits and withdrawals within that month.

Bank of America is converting all eBanking accounts into its Core Checking product, which includes a $12 monthly fee. There are a few ways consumers can avoid the $12 monthly maintenance fee. The first way to avoid the fee is to have a qualifying direct deposit of at least $250. The second is to maintain a minimum daily balance of $1,500 or more. The third is to prove the you are a student younger than 24.

“With a direct deposit of just $250 per month or $3,000 per year, customers will get full access to all of our financial centers, ATMs, mobile and online banking,” Bank of America spokesperson Betsy Riess told the Wall Street Journal. “That’s a great value and our client satisfaction scores are at all-time highs.”

A Golden Opportunity to Strike

BofA’s launched its eBanking account in 2010 after a successful pilot test in 2009. The eBanking account was greeted with howls of derision from both consumers and the media alike. But customers ended up loving the account. Now that BofA is killing it off, people and the press are freaking out again.

For many low income customers who tend to have low balances, it will be difficult to meet BofA’s new requirements. These folks don’t always have regular paychecks and some get paid in cash, in which case direct deposit is out of the question. The customer’s employment status isn’t the only issue. The $1,500 average daily balance is way beyond the reach for most low income consumers who struggle making ends meet from month to month.

Eliminating free checking could be seen as part of a wider move from large retail banks looking to recoup revenues lost due to regulatory pressures (e.g., CFPB crackdowns on overdraft fees). But it’s interesting to note that Bank of America seems to be going in the opposite direction than digital-only upstarts — the much-celebrated challenger banks that are disrupting banking’s status quo by offering fee-free accounts regardless of deposit amounts.

This is a golden opportunity for any retail financial institution that still offers any flavor of free checking. Digital banks like Simple, Ally and BankMobile, as well as smaller banks and credit unions would be smart to capitalize on Bank of America’s announcement. Now, today. Strike while the fire is still hot and customers are still burning with rage.

This isn’t the first time that Bank of America has faced a backlash from consumers. Back in 2011 the bank began charging a $5 monthly fee for debit cards, which it later dropped. Consumers, still mad about the financial crisis bailouts to big banks, went nuts. And a few institutions rightly took advantage of Bank of America’s vulnerability.

In response, Lafayette Federal Credit Union which placed ads in local newspapers following the Bank of America announcement.

“There’s no reason to pay your bank when we’re here to pay you,” the credit union ad declared, touting its no-fee checking account with debit card, no minimum balance requirements and dividends paid quarterly. Lafayette FCU added a photo of a visibly annoyed Millennial cutting up their BofA debit card with the caption, “$#%&’n mad? You should be!”

The ads worked. Lafayette’s online applications increased 50% the following month.

Read More: 16 Must-Have Mobile Banking Features that Raise the CX Bar

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BofA’s Brand Gets Blistered Online

A petition launched on requesting that Bank of America reinstate no-fee checking has been signed by over 100,000 people.

“Bank of America was one of the only brick-and-mortar banks that offered free checking accounts to their customers,” says Mel San, who launched the petition. “Bank of America was known to care for both their high income and low income customers. Now sadly, Bank of America seems to have changed their mind and wants to no longer offer free checking accounts to the American public. I urge you to let Bank of America realize that this is unfair to their customers that have been loyal to them for years.”

The bile and ire on Twitter is palpable.

“Bank of America is in a breakneck race for the slimy bottom of the barrel with Wells Fargo,” wrote @TeaRoadTiger in a tweet. “Truly abhorrent. Seriously, have you no shame?”

Opportunistic financial institutions will look for ways to capitalize on tweets like the one above from @helenaoftroy.

You can find hundreds of tweets with a similar spiteful tone and message of injustice.

“I have done my banking with you guys since 2014 and I will be closing my account tomorrow morning after reading about your penalties for the poor,” tweeted @Jezibel2. “You ought to be ashamed.”

“I’ve been with Bank of America since I was in middle school,” wrote Abe Rakov. “This will take food off some of their customers’ tables. It will prevent others from getting medicine. I’m getting a new bank.”

“Why are you putting checking fees on people with low incomes,” tweeted Allison Mickey. “My husband and I have our accounts with you. We are going to look into credit unions.”

@FeysPerson is also looking at credit unions as an alternative. “Bank of America will never get another dime out of me,” their tweet said. “I’m going to a credit union for everything.”

NPR’s Morning Edition host Steve Inskeep piled on with the criticism. “If you have $1,000 in the account, $12 is 1.2% of it — per month,” his tweet states. “Multiply by 12 months: people without much money are charged an annual rate of 14.4% for the bank to hold their money and process checks.”

Democratic Senator Ron Wyden also chimed in. “After receiving a massive tax cut, Bank of America is targeting its poorest customers with fee increases,” he tweeted. “Cruel.”

It’s not just Bank of America’s lower income (and less profitable) customers who may leave. Higher income consumers are also spitting mad.

“I’m one of your higher-end clients,” Catherine Bell of Amherst, Massachusetts, told BofA. “But I will have to end my relationship with you if you start charging low-income people the $12 monthly fee. It’s usurious, inhumane and nonsensical.”

Lance McCarthy shared Bell’s perspective. “I’m a Platinum account holder at Bank of America, with business and personal accounts and several cards,” McCarthy wrote on Twitter. “Everything is free for me, but you’re going to charge struggling people fees?”

McCarthy says he intends to pull his accounts from BofA as soon as possible.

Actor Sean Ford has also threatened to close his account at Bank of America and switch to a credit union.

Reality Check: Financial institutions might assume that BofA’s refugees aren’t profitable customers worth pursuing, but that would be a mistake. Some very profitable high-value customers are expressing their outrage over the perceived “immorality” of dinging low-income consumers with fees.

NerdWallet doesn’t have a problem, per se, with the amount of Bank of America’s service fee, noting that the $12 monthly charge isn’t out of line with other large institutions. But it does wonder why “one of the country’s largest financial institutions wouldn’t throw more resources toward creating more attractive checking products.”

Groups such as the Lawyers Committee for Civil Rights Under Law issued a statement condemning Bank of America and asking the bank to reverse this decision.

“Poor people who are denied access to traditional bank services are left vulnerable to costly check-cashing outlets, pawnshops and other predatory services,” the civil rights group said in a statement. “Bank of America’s action will result in the expansion of unbanked and underbanked communities across our country. This action also has a disproportionate impact on poor African-American and Hispanic consumers who are overrepresented among those who are unbanked and underbanked across the country.”

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Is This The End of Free Checking?

It’s true that it’s becoming more difficult for consumers to actually find free checking accounts, but they do exist. According to a MoneyRates survey, 28% of banks offer checking accounts without a monthly service fee. In contrast, more than two-thirds (70%) of digital banks have free checking. Digital banks also require a lower minimum deposit to start an account: $26.39 for digital banks versus $121.43 for traditional banks.

Consumers looking to avoid monthly service fees on checking accounts tend to have more success at smaller institutions, with 40% of community banks providing some type of free checking account. Credit unions may be an even better bet than a small bank for consumers. BankRate looked at banks and credit unions and found that 84% of the nation’s largest credit unions offer checking accounts with no monthly service fees.

As Bank of America continues to take it on the chin with yet another consumer backlash, this could be your opportunity to attract deposits before rates rise further. You’ll not only need to get out the message like Lafayette FCU did back in 2011, but you should also offer people a viable, easy way to switch. Stress how easy to open a new account in your marketing, and provide tools/services to help them migrate their transactions — e.g., deposits, automatic withdrawals, bill pay, etc.. Consider putting together a switch kit and have employees trained on how they can help consumers switch.

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