The Fine Print Blog

The MagnifyMoney team will share their thoughts as they work to save you money and hold banks accountable. 

Last week, the Wall Street Journal showed us that banks at Wal-Mart are some of America’s top fee collectors. They looked at fee income as a percentage of deposits and found some staggering results.  

Fort Sill National Bank, the worst of the Wal-Mart banks, generated $20 of fee income for every $100 of deposits last year. And most of those fees come from overdrafts. The story described a woman who needed to borrow $300 for 12 days. At Fort Sill National Bank, that would cost her $19.50.

The data introduced us to banks whose sole purpose is charging overdraft fees on people with little money. The Journal says that “banks inside its outlets are among America’s highest payers of bank fees - a large chunk of which come from overdraft charges.”

But, are customers at Fort Sill National Bank really paying more in fees than customers of Bank of America, or other mainstream banks? These banks may not be in the Wal-Mart store, but they can often be found in the same shopping center.  

We went to the same FDIC dataset used in the WSJ article. We looked at how much an average branch charged its customers for checking and savings accounts.  The fees included monthly account fees, ATM fees, overdraft and NSF fees.   

Fort Sill is still high on the list (#16 in the country). It generated $632,630 in deposit account fees per branch last year.  

But Bank of America (#4 on the list) generated nearly $1 million ($986,652) in fees per branch last year. And, unlike Fort Sill Bank (which charges $19.50 for a 30 day overdraft), Bank of America’s overdraft policy would charge $35 at the time of the overdraft, and then another $35 every 5 business days that your account has a negative balance. The same $300 overdraft would cost $70 at Bank of America, compared to $19.50 at Fort Sill National Bank.  

And who were the Top 3, ahead of Bank of America?  

  • Fort Hood National Bank, which offers military banking, targeting those who serve ($1.3 million per branch)

  • Cole Taylor Bank, whom the Fed just recently concluded “engaged in a deceptive practice relating to the checking account opening process.”  And who did Cole Taylor target? College students on financial aid.

  • The Northern Trust Company, a private bank that charges premium prices for premium service to high net worth individuals.

Use our product comparison tools for checking and savings accounts to ensure you aren't losing too much to the banks in hidden fees. 

Below are the results of the MagnifyMoney analysis of the data:

 

Views from Former Insider

It is important to understand how banks make money on their retail banking business. Fees in banking (checking and savings accounts) are usually reserved for the very poor and the very rich.

  • If you keep very little money in the bank, then banks look to make money by charging monthly maintenance fees and overdraft fees (with overdraft being the most lucrative)

  • If you have $1,500 or more in deposits (minimum balance, every day), you will pay very few fees.  And if you have $20,000 or more - you will pay virtually no fees (and banks will be happy to reverse fees when they are charged).  Why?  You are providing cheap deposits that can be used for lending.

  • If you have a high net worth / private banking relationship (assets in the millions), then you often pay for high-touch service.  

#1 on the list is Fort Hood Bank, targeting the people who serve our country in the armed forces.  Their customers will likely have limited assets, and the fee revenue will likely be dominated by overdraft and NSF fees.

#2 on the list is Cole Taylor Bank, which has made news targeting college students on financial aid, who also have limited assets.

#3 on the list is The Northern Trust Company, a private bank.  The average account generated $477 in fees last year. They have 77 offices.  

#4 is Bank of America, with 5,319 branches. BofA looks particularly bad when compared to the other big 4 banks:

  • Bank of America charges, by far, the most fees per branch.  23% more than Wells Fargo and 27% more than Chase.  

  • Citibank only generates $278,210 per branch, 72% less than Bank of America.  Citi does not have an extended overdraft fee.

I believe that the overdraft market is ripe for disruption. The revenue generated from the activity bear no relation to the cost of providing the service. My thoughts on how we can make the system better are here.  

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