Banks instituting new fees hope to avoid customer attrition problems
2010-07-22
With the financial regulation bill now officially signed into law, many institutions are determining how to prevent customer attrition as they shift from free accounts to fee-based systems.

Wells Fargo has simply eliminated its free checking accounts for new customers, and has created a $5 fee for new basic accounts. Bank of America, meanwhile, is taking a more segmented approach. It is moving to replace its free student checking account with an eBanking account, which charges a monthly fee if customers want paper statements or visit a teller unnecessarily. By targeting the account at younger customers - who are traditionally more open to online banking - the company hopes it will avoid significant attrition.

But analysts say the increase in bank fees will cause many customers to close their accounts. Richard Bove, an analyst at Rochdale Securities, told MarketWatch that maintenance charges will force roughly 14 million poorer bank customers to close their accounts, further expanding the underbanked and unbanked populations.

Charging fees for customers who visit a teller, as Bank of America's eBanking platform would, is not a completely new concept, although its widespread success would be. Bank Technology News reports that in 1995, customers were "livid" when First National Bank of Chicago instituted a $3 teller fee. After continued criticism, the fee was dropped from most accounts the following year.

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