Online banks boom as dissatisfaction with traditional banks grows
People are fleeing banks they see as evil, for online institutions.
Online-only banks are experiencing a surge in new customers following an unprecedented public backlash against brick-and-mortar banks, particularly Bank of America. The PR bust for traditional banks is a boom for online institutions.
People are hoping that online banks are the panacea against the ills of traditional brick-and-mortar banks.
Last year, many banks did away with free checking, and this year Bank of America, along with other large banks including Wells Fargo, have announced that they are either testing or will implement new fees for debit card users. Bank of America seems to have upset the most people, with their proposed $5 dollar fee beginning in the summer of 2012 for customers who use their debit card to make a purchase.
Bank of America says that the new fee structure is designed to make up for losses as a result of legislation that caps fees they can charge retailers when a customer uses a debit card. This is in spite of the fact that Bank of America has enjoyed a 13 percent increase in fee revenue since the start of the year. Bank of America contends that the fees are necessary to pay for the processing and handling involved with debit card use.
Still, even supporters of Bank of America are finding the announcement difficult, saying that the timing of the new fee is poor. Announcing the fee at the same time as the imposition of the new caps on interchange fees makes the decision look like retaliation against the people. Add that to growing popular sentiment that is becoming increasingly critical of Wall Street and banks as seen in the recent Occupy Wall Street movement, and Bank of America begins to look downright evil to some folks.
Even B of A's CEO, Brian Moynihan's remark that "we have the right to make a profit" is being cynically construed although the statement is entirely correct.
Still, Bank of America isn't the only one trying to recover losses from the Frank-Dodd Act. Citibank has already announced that they would double their monthly service charge on their EZ Checking accounts from $7.50 to $15 in November.
Online banks are capitalizing on this by offering no fee checking accounts, debit awards, and paying interest on deposits. They're being helped by political rhetoric that encourages they "vote with their feet" and pull their money from large banks and put it into credit unions and online-only banks. New legislation is likely to soon be introduced that will also make it easier for customers to change banks.
While customers may enjoy the return to banking without fees, they will be giving up a certain amount of convenience that brick-and-mortar locations provide. For example, if someone is using an online-only bank, they will not be able to speak to a live teller or branch manager. Rather, they will have to put up with telephone support, or worse , online support which might not prove helpful, or at the very least time-consuming as they wait for e-mailed responses.
Only time will tell if the exodus will continue to snowball or slow down, and nobody can predict if the move to online-only banking is the best move for American consumers.
At least one thing is certain, politicians are sure to capitalize on the wave of dissatisfaction.
© 2011, Catholic Online. Distributed by NEWS CONSORTIUM.
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Pope Benedict XVI's Prayer Intentions for January 2013
General Intention: The Faith of Christians. That in this Year of Faith Christians may deepen their knowledge of the mystery of Christ and witness joyfully to the gift of faith in him.
Missionary Intention: Middle Eastern Christians. That the Christian communities of the Middle East, often discriminated against, may receive from the Holy Spirit the strength of fidelity and perseverance.
Keywords: online banking, brick and mortar banks, Bank of America, Wells Fargo, fees, legislation, Frank Dodd act
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