Business Columns & Blogs

A flowing revenue stream

A “conversation” about current developments and trends in consumer banking:

The banks: We wish to inform you about some modifications to your current no-fee checking account. We value you as a customer and thank you for your business...

The consumers: Get to the point: How much are you shaking us down for this time?

Banks: You’ll now be assessed a monthly fee of $6.95 a month ($8.95 a month if you want a paper statement), although you can avoid that with direct deposits of $500 a month or an average account balance of $1,500.

Consumers: $6.95 a month??!!?? $83.40 a year for a basic checking account? We’re not sure we want to be driving on the same road as someone who would pay that much.

Banks: Be glad we’re not converting you to “premium” checking. That’ll run you $10.95 a month – unless, of course, you maintain an average balance of $5,000 or are over 65.

Consumers: Just admit it, you hate the idea of free checking accounts. You’ve always hated free checking accounts. You’ve really hated free checking accounts ever since Washington Mutual made such a big marketing deal out of them and took your customers.

Banks: And look how well that worked out for WaMu. Besides, you didn’t really think those accounts were free to provide or free to use, did you? You still had to pay fees for things such as overdrafts. “Free” was a term just as empty as your bank account was when you wrote a check for money you didn’t have, generating nice fee income for us.

Consumers: Funny you mention that. Did you see the news reports last week about the court settlement Bank of America agreed to? $410 million to make suits go away, suits that charged that banks were racking up big income by deducting the biggest check or debit-card transactions from customer accounts first, thus draining the accounts and triggering more overdraft fees faster. How’s that working out for you?

Banks: We value you as a customer and thank you for ...

Consumers: Look, what is it with this fixation with fee income anyway? Why can’t you go back to making money the old-fashioned way? What happened to the 3-6-3 rule of banking? Take deposits in at 3 percent, loan them out at 6 percent, hit the golf course by 3 in the afternoon? Heck, we’d be thrilled to get 3 percent on our money. How come you can’t make money when you’re not paying for deposits? What other business gets its raw material at no cost?

Banks: Because, in case you hadn’t noticed, that doesn’t work anymore. Maybe it’s because all those competitors took away businesses such as car loans and mortgages. Or maybe it’s because we’re not very good at making good loans. Or maybe it’s because you haven’t been very good about paying them back.

Consumers: So how is it going to work when what customers you have left flee to the credit unions, or the alt-financers, or Fidelity and Schwab – or just stuff the money in a mattress?

Banks: You don’t think those other guys aren’t thinking the same things about fees we are? Well, maybe the mattresses aren’t.

Consumers: This isn’t going to stop, is it? You’ve always schemed to make us pay to give you our money, to store our money and to withdraw our money. You did it with checking accounts, you did it with ATMs, you’re doing it with credit and debit cards, and who knows what fee schemes you’ll dream up when we move entirely to stored-value cards and purely electronic transactions.

Banks: Please, “scheme” is such an ugly word. We prefer the term “business model.”

Bill Virgin is editor and publisher of Washington Manufacturing Alert and Pacific Northwest Rail News. He can be reached at