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Banks likely to try range of new fees

By Todd Wallack
Globe Staff / November 3, 2011

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Bank of America Corp. and other major banks have scrapped plans to charge customers for using debit cards, but the companies are almost certain to raise or introduce a host of other fees to protect their profits.

Consumers should prepare for even higher checking and overdraft charges, analysts said. If they use another bank’s automatic teller machine, they may well get hit with higher ATM fees. And if they want to receive paper statements in the mail, they may end up paying for that, too.

“The debit card fee was only one of several different levers that banks can pull,’’ said Greg McBride, an analyst for Bankrate.com, a website that tracks rates on checking accounts and other financial products. “Consumers should continue to be vigilant about the prospect for new and higher fees.’’

Banks have been steadily raising fees to make up for losses from the weak economy, troubled housing market, and tougher regulations since the financial crisis in 2008. Over the past year alone, the average monthly checking account fee has increased by 76 percent, to about $4.40 a month, according to Bankrate.com. And the average ATM surcharge recently hit a record high of $2.40 per withdrawal, up 3 percent from last year.

Analysts expect banks will probably continue to raise monthly checking account fees or make it harder for customers to avoid those fees by raising the minimum balance requirements. In August, Bankrate.com found just 45 percent of standard checking accounts were free, down from 76 percent two years ago. Bankrate also found the average minimum balance required to avoid monthly checking fees was $585, more than double the minimum last year.

It’s unclear how much higher fees will go, but analysts said banks will raise fees when and where they can. For example, TD Bank, the fourth-largest retail bank in the state, boosted a variety of peripheral fees last month. For instance, some customers will now pay $15 for incoming wire transfers, up from $10; $5 for money orders, up from $4; $8 for a certified check, double the old charge; and $30 for stop payment orders, up from $25.

Banks may also come up with new fees. Banking analyst Bart Narter said banks could charge customers more for costly services such as processing paper checks or mailing paper statements.

“I would suggest raising prices on things that cost money,’’ said Narter, senior vice president for Celent, a financial consulting company based in Boston.

As fees go up, consumers should expect rewards programs to shrink, analysts said. For instance, Citizens Bank, the second-largest retail bank in Massachusetts, plans to stop offering its GreenSense rewards program at the end of this month.

The program offers customers 10 cents every time they make a debit card purchase or electronic payment. Bankrate found that one-third of US banks cut their debit card rewards promotions over the past year.

Another way banks could increase their revenues is to roll out new optional products that they can sell to customers. For instance, Citizens Bank plans to offer customers a bundle of services, including identity theft and fraud protection, for $6.99 a month.

One fee they likely won’t try to levy again is the monthly charge for making debit card purchases. Following a backlash from customers, Bank of America canceled plans on Tuesday to start charging some customers $5 a month to use their debit cards to make purchases. The decision came after other large banks gave up on similar charges. Debit card fees are effectively dead, said Narter.

Bank of America spokeswoman Anne Pace said the bank is not considering any new fees for now, but did not rule out price increases in the future.

“There is value to the products, services, and access we offer and we need to consider how we continue to offer it at a fair price,’’ Pace said.

Sovereign Bank, another major regional bank in Massachusetts, did not return calls about its plans.

Many small community banks and credit unions are trying to capitalize on anger over bank fees by heavily marketing free checking accounts.

More than 70,000 people have joined a Facebook group started by an art gallery owner that urges people to move their money from banks to lower-fee credit unions by Saturday, dubbed “Bank Transfer Day.’’

One local institution, Liberty Bay Credit Union in Boston, has signed up twice as many customers as usual in the past month, partly because of the backlash against debit card fees, said Kenneth Dyer, the chief executive. Liberty Bay has 27,000 members.

Despite the demise of the debit card fee, Dyer predicted big banks will add or raise other fees to offset the income they have lost because of the new debit card regulations, which cap transaction fees that large banks charge merchants. The regulations don’t affect credit unions and small banks.

“They will need to fill the gap from somewhere,’’ Dyer said.

Todd Wallack can be reached at twallack@globe.com. Follow him on Twitter @twallack.