HARRISBURG, Penn.-Wells Fargo's expansion of its $7 monthly checking fee into six new states will only keep Bank Transfer Day momentum going, predict several CU CEOs, including one who laments that someday credit unions will likely join the big bank in adding checking charges.
Wells Fargo will introduce a $7 monthly checking fee this June in New Jersey, New York, Connecticut, Pennsylvania, Delaware, and Georgia. The fee is already in place in 26 states.
The move should help Pennsylvania State Employees CU sustain an increase in new member growth started last fall, said CEO Greg Smith. PSECU was adding from 2,000 to 2,500 new members monthly through the summer, after which the total jumped to 2,500 to 3,000 on average. That momentum has carried into 2012. "The banks just keep doing everything they can to turn more customers toward credit unions," said Smith. "People are already fed up with the bank fees and this is just piling on."
The $4-billion PSECU intends to continue to head in the opposite direction of banks, adding more ways to give back to members, said Smith. Last year the credit union more than tripled its foreign ATM surcharge rebate to $20 a month for qualifying members and extended weekly call center hours by nearly 50%.
Would Like To Hold The Line, But...
Thomas O'Shea, CEO of the $200-million Aspire FCU in Clark, N.J., said the new Wells Fargo fee in his state could bring "Bank Transfer Day all over again. It's wonderful."
Yet O'Shea said he sees the handwriting on the wall and understands why Wells Fargo is extending the $7 charge to more states. He reminded that big banks have been hit hardest by the CARD Act, Durbin Amendment, and new overdraft rules that are affecting revenue streams and adding compliance costs. Aspire does not charge for checking and pays 1.50% APY when members swipe their debit card 12 times each month. O'Shea is not optimistic his credit union and others will be able to hold the line on fees if debit interchange revenue begins to sharply drop and new regulations arise.
"At some point credit unions will have to face that reality and do something," said O'Shea, sharing his angst over what is causing all the bank fees. "The costs for processing transactions and paying for fraud losses used to be invisible to consumers, pennies on transactions. I told our elected officials that if they put in the Durbin rules those pennies will turn into dollars consumers pay every month. Now we are there."
The $24-million 1st Choice CU in Atlanta is already charging members a $7 checking fee if they don't have direct deposit. Interim CEO Daniel Caldwell said he expects the inflow of new checking customers to pick up when the Wells Fargo charge arrives. "It comes right at the time we are offering to waive all checking fees for 90 days for those who transfer their checking from a bank."
Bill Hardekopf, CEO of LowCards.com, Birmingham, Ala., does not expect the Wells Fargo fee in the new markets will create nearly the stir that resulted from BofA's debit card charge. "There you had five or six banks charging for debit and BofA took the fall. I think in these six states-and more if the media picks up on it-Wells Fargo is simply adding to the anti-bank sentiment that is already growing and credit unions will benefit. But without a doubt, what this new charge says is that banks are looking for as many ways as possible to make up their revenue losses."
Charge Can Be Avoided
Richele Messick, spokesperson for the San Francisco-based Wells Fargo, said the bank intends to eventually extend the checking fee to all 39 states it does business in, plus the District of Columbia. She explained the charge can be reduced by $2 when customers take e-statements and can be avoided altogether if they take direct deposit or maintain a $1,500 average daily balance.
Messick said Wells Fargo expects the fee will encourage more customers to become more active users of the bank, which will allow Wells Fargo to "provide them with greater value." Asked by Credit Union Journal if the move was aimed at driving off unprofitable accounts and if the bank is seeing customer runoff in markets where the fee has been in place, Messick said that was not the bank's intent and that "the bank's earnings continue to grow."
