WEEKLY ADVISER: Fee, Fi, Fo, Fooey: My Bank Sends Me a Little List

I just received my service charge list from my new bank.

Now, I favor noncredit income as a basic source of profit. But when I saw the 50 services for which my new bank charges a fee, I thought of the man on the Titanic who lamented: "I ordered ice, but this is ridiculous."

I say my "new bank" because my old bank, where I have kept my accounts for 27 years, was just sold to a superregional.

I was looking forward to the changeover. I had been told that the acquirer has state-of-the-art technology, and that therefore I would see new and useful ways of interacting with tellers and working with platform employees.

I haven't seen this yet, of course, but I am happy to report that the same people I have known for years remain in the teller positions - a must for a bank trying to retain good customers after a takeover.

My first experience with the new organization was not auspicious, however. I received a phone call:

"Mr. Nadler, with our new organization we are changing the number of your account. As of the end of April, you will have to use the new number. Your checks will have to be replaced, and we are sending you a starter kit of new ones."

"But I just bought 500 checks from you at a price of well over $100 and I have 397 left."

"Well," she responded, "you have a full month to use them up. And we will be sending you a starter kit of new ones free."

"Don't bother," I said, "because if my checks are no good and I have to change them anyway, I might as well change banks, too."

This ended the call. I guess it worked, because I have been told that my "starter kit" will have at least 397 checks in it.

Well, next came the "Retail Accounts Service Fees" brochure.

I noted, happily, that my old bank's $12 annual fee just to own an ATM card has been eliminated for everyone.

I had campaigned in these pages against that fee as an example of the Tom Sawyer school of banking, under which bank charges you for something that is mainly to its benefit. (After all, the more you use the card, the fewer tellers the bank needs.)

To be fair to my new bank, the service fees seemed justified.

They included charges for many special services, such as helping with account reconciliation, conducting inquiries on transactions, and closing an account opened less than six months before. Of course, there are also the fees for stop payments, writing checks on insufficient or unavailable funds, and replacing lost ATM cards - all customer faults.

Two items did raise red flags: a $5 monthly charge for telephone banking and a $1-an-item setup charge for exceeding 20 telephone transactions a month.

A lot of questions have yet to be answered on home banking in general and service fees for it in particular. Even its most vehement defenders admit it has not caught on the way they thought it would.

Reasons: The public won't pay for it, and people worry about its accuracy in getting the bills paid on time.

Banks that offered telephone bill-paying service for free found that the customers were underwhelmed. Even for those using the Internet, the service remains complicated and expensive and is catching on very slowly, despite heavy promotions by some institutions.

Fees for necessary services are fair; I gladly pay a sizable fee for an unusual transaction. I wonder about home banking, however, and about the "smart card" being inaugurated in New York City.

Is it worth 2% to 3% to you to pay for a newspaper or a cup of coffee with plastic rather than paper (or coins)? Remember, there is no safety feature, so if you lose the card or your kid takes it, it is lost money - just as if you lost a $50 bill.

To my mind, the services you get for some of these fees look like answers in search of questions.

Mr. Nadler is a contributing editor of the American Banker and professor of finance at Rutgers University Graduate School of Management.

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