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Fees surge as banks hunt for revenue

Customers whose balances slip hit with $50 levy

By Todd Wallack
Globe Staff / January 9, 2012
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Many bank customers have long felt nickeled-and-dimed by fees imposed by financial institutions. But now some banks are demanding much bigger denominations.

The region’s largest banks are charging consumers as much as $50 a month if they do not maintain minimum balances or meet other requirements for certain high-end checking and savings accounts.

Citizens Bank charges customers $50 a month when the balance in a top-end money market account slips below $1,000. Sovereign Bank imposes fees of up to $30 a month, and Bank of America and TD Bank each charge $25 a month whenever customers fall short of minimum balance and other qualifications for some premium checking accounts.

“I haven’t seen anything like $50 a month before,’’ said Greg McBride, an analyst with Bankrate.com, a website that tracks bank fees and interest rates. “That’s a steep price to pay.’’

The sticker shock is the latest sign that US banks are pushing fees to new heights to boost revenue and shed unprofitable customers with slim balances. Since 2009, banks across the country have more than doubled the average monthly maintenance charge for basic checking that does not pay interest, to $4.37, according to Bankrate.com.

But many of the nation’s largest banks now charge $25 or more per month for premium accounts that offer higher interest rates, free checks, or extra services.

The average fee for interest-bearing checking tops $14 a month nationally, up from $12.55 in 2009. Some institutions may waive the charges if customers complain, as is the case with most bank fees. Bank profits have been pummeled since 2008 because of steep losses on mortgages, tepid demand for loans, low yields on investments, and new regulations. The biggest banks have lost billions of dollars in revenue from new rules reducing the amount they can collect in debit card fees and limiting overdraft charges.

“Banks have been trying to recoup some of those lost revenues or get rid of accounts that are not cost-effective,’’ said Richard Barrington, senior financial analyst for MoneyRates.com, a financial website that tracks bank rates.

Spiros Aloupis, a Citizens Bank customer in Revere, said he was shocked when he received mail advertising the bank’s Performance Money Market Account and saw the $50 monthly fee for letting the balance fall below $1,000 on any day during the month. Aloupis said he thought it was a mistake, until he called and Citizens confirmed the fee.

“Isn’t that ridiculous?’’ said the 86-year-old retiree, who has a safe deposit box with the bank.

The account, launched in 2010, pays higher interest rates than some other savings accounts, although it is still well under 1 percent a year. Citizens, headquartered in Providence, is the second-largest retail bank in Massachusetts and one of the largest US regional banks.

Citizens spokesman Jim Hughes said less than 1 percent of customers were hit with the fee last year. And when customers complain, the bank will generally refund the fee and move customers to different accounts with lower fees and balance requirements.

“We don’t want customers in accounts that don’t fit their needs,’’ Hughes said. “It doesn’t make economic sense for them or for us.’’

McBride said he can’t imagine that customers slapped with a $50 fee would not either close their accounts or immediately increase their balances. “There’s no excuse to have something like a $50 fee hit your account in consecutive months,’’ McBride said.

Even a $25 monthly fee can sting.

Christine Simeone of Charlestown was shocked after discovering in November that Bank of America, the largest bank in the state, had slapped her with a $25 checking account fee three months in a row.

Simeone, who does not receive paper statements, did not immediately notice that the bank, which is phasing out its old slate of accounts, had switched her to a new premium account with a higher minimum balance and large monthly fee.

“I was stunned,’’ said Simeone, a public relations executive. “I would have associated a $25 fee as a one-time fee - like for a returned check - not a monthly fee.’’

Simeone, 44, said she switched to a different account with a lower minimum balance to avoid the monthly fee in the future. But Bank of America initially refused to refund the $75.

A spokeswoman, Betty Riess, said Bank of America decided to reverse the fees after the Globe contacted the bank about Simeone.

“We want to make sure customers are in the account that best meets their needs,’’ she said.

Sovereign Bank, third-largest in the state, said it charges $30 a month for its premier checking account if customers don’t maintain at least $20,000 in deposits, loans, or investments. A spokesman declined to comment on the fee.

TD Bank, the fourth-largest, charges $25 a month for two high-end checking accounts. Customers can avoid the fee on the TD Premier account with a daily balance of $2,500 and the TD Relationship account with balances of $20,000 or more. TD spokeswoman Rebecca Acevedo said the rates are competitive and the accounts offer “great value’’ with benefits such as no ATM fees.

But the hefty monthly fees have not stopped banks from tacking on smaller ones, too.

Next month, TD Bank plans to start charging noncustomers $5 to cash a check drawn on TD Bank at its branches. Bank of America, Citizens, and Sovereign already charge similar fees of $5 to $7.

Still, many credit unions and community banks continue to offer free basic checking accounts.

And bigger banks usually offer basic accounts with smaller monthly fees, typically $3 to $10, or with easier ways to avoid maintenance charges.

“You’ve got some choices,’’ said Barrington.

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

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