# Why would anybody pay to simply \*have\* a bank account? **URL:** \ **Category:** Factual Questions\ **Created:** [September 14, 2016, 1:19am UTC](https://boards.straightdope.com/t/why-would-anybody-pay-to-simply-have-a-bank-account/765902 "2016-09-14T01:19:03Z")\ **Posts on this page:** 20\ **Page:** 2
**Author:** ![dracoi](https://avatars.discourse-cdn.com/v4/letter/d/90db22/32.png) [@dracoi](https://boards.straightdope.com/u/dracoi)\ **Post date:** [September 14, 2016, 5:32pm UTC](https://boards.straightdope.com/t/why-would-anybody-pay-to-simply-have-a-bank-account/765902/21 "2016-09-14T17:32:11Z")
> [@leahcim](#): > > “Free” checking accounts are just checking accounts paid for in a different way. This is a good point. I deal with lots of people’s accounting issues, so I often see how often they incur fees. More than one person who would never, ever pay $5/month ($60/year) for a bank account will not complain about paying $105/year in overdraft charges (that’s just three overdrafts at many banks). And I’ve seen at least three people over the years who paid more than $1000 in overdrafts in a year. One did more than $10,000 in a year! So even if someone with free checking is the unusual customer who never generates overdrafts, the banks see this as a numbers game. All of the customers with “free” checking are generating $x in revenue. ---
**Author:** ![leahcim](https://avatars.discourse-cdn.com/v4/letter/l/b4bc9f/32.png) [@leahcim](https://boards.straightdope.com/u/leahcim)\ **Post date:** [September 14, 2016, 5:52pm UTC](https://boards.straightdope.com/t/why-would-anybody-pay-to-simply-have-a-bank-account/765902/22 "2016-09-14T17:52:32Z")
> [@dracoi](#): > > So even if someone with free checking is the unusual customer who never generates overdrafts, the banks see this as a numbers game. All of the customers with “free” checking are generating $x in revenue. I wasn’t even thinking of overdrafts. I was thinking that the bank is using my money to create loans upon which it charges interest, and not paying me very much of that interest, if any so I am “paying them” by forgoing the interest I could have made investing that money in a less liquid investment. If there was a bank that said, “I will charge you $10/month for your account, but pay you 75% of the interest income we make off your money” I would switch to that easily. ---
**Author:** ![dracoi](https://avatars.discourse-cdn.com/v4/letter/d/90db22/32.png) [@dracoi](https://boards.straightdope.com/u/dracoi)\ **Post date:** [September 14, 2016, 7:10pm UTC](https://boards.straightdope.com/t/why-would-anybody-pay-to-simply-have-a-bank-account/765902/23 "2016-09-14T19:10:06Z")
> [@leahcim](#): > > I wasn’t even thinking of overdrafts. I was thinking that the bank is using my money to create loans upon which it charges interest, and not paying me very much of that interest, if any so I am “paying them” by forgoing the interest I could have made investing that money in a less liquid investment. > > If there was a bank that said, “I will charge you $10/month for your account, but pay you 75% of the interest income we make off your money” I would switch to that easily. I think the usefulness of free checking for that purpose is lower than most people assume. When you look at total bank deposits, it’s kind of like the 99% movement all over again. For every 99 average Joes with $1,000 in their free checking accounts, there’s one fat cat who limits his savings account to $250,000 because he doesn’t want to exceed the FDIC limits. That single one-percenter is more useful to the bank than all the other 99 put together. There’s twice as much money, and he’s cheaper to service, has more stable deposits, etc. The average Joes only have $100,000 at the bank, on average, right? But if they’re average Joes then they pay two or three overdrafts a year. Let’s call that $70 each, on average, per year. The bank made $7,000 in overdraft fees on only 100,000 in deposits, equivalent to loaning the same balance at 7%. The real statistics are messier than my simple example, but banks make big money off of fees attached to “free” accounts. ---
**Author:** ![Philster](https://avatars.discourse-cdn.com/v4/letter/p/13edae/32.png) [@Philster](https://boards.straightdope.com/u/Philster)\ **Post date:** [September 14, 2016, 7:34pm UTC](https://boards.straightdope.com/t/why-would-anybody-pay-to-simply-have-a-bank-account/765902/24 "2016-09-14T19:34:46Z")
Wells Fargo does not want or need your piles of cash. They make profits not through investing your money; they make profits through fees. Fees are revenue and some becomes profit. If they have your money and you pay no fees, they lose. Period. ---
**Author:** ![bump](https://avatars.discourse-cdn.com/v4/letter/b/7c8e57/32.png) [@bump](https://boards.straightdope.com/u/bump)\ **Post date:** [September 14, 2016, 8:29pm UTC](https://boards.straightdope.com/t/why-would-anybody-pay-to-simply-have-a-bank-account/765902/25 "2016-09-14T20:29:11Z")
> [@Philster](#): > > Wells Fargo does not want or need your piles of cash. > > They make profits not through investing your money; they make profits through fees. > > Fees are revenue and some becomes profit. If they have your money and you pay no fees, they lose. > > Period. While fees are certainly a big piece of the revenue pie for their retail banking business, they can and do make a lot of money by making loans of all kinds- mortgages, car loans, business loans, lines of credit, etc… Where do they get that money? Other customers, of course. ---
**Author:** ![Alley\_Dweller](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/alley_dweller/32/430_2.png) [@Alley\_Dweller](https://boards.straightdope.com/u/Alley_Dweller)\ **Post date:** [September 15, 2016, 12:02am UTC](https://boards.straightdope.com/t/why-would-anybody-pay-to-simply-have-a-bank-account/765902/26 "2016-09-15T00:02:57Z")
> [@Philster](#): > > Wells Fargo does not want or need your piles of cash. > > They make profits not through investing your money; they make profits through fees. > > Fees are revenue and some becomes profit. If they have your money and you pay no fees, they lose. > > Period. Excerpts from the [6/30/16 Call/TFR report](https://www5.fdic.gov/idasp/advSearchLanding.asp) for the calendar year thru 6/30/16 for Wells Fargo Bank, NA, Sioux Falls SD (all figures expressed in thousands): 1. Total interest and fee income on loans 18,334,000 h. Total interest income (including loans) 23,924,000 e. Total interest expense 1,718,000 1. Net interest income 22,206,000 a. Income from fiduciary activities 958,000 b. Service charges on deposit accounts in domestic offices 2,875,000 ---
**Author:** ![elfkin477](https://avatars.discourse-cdn.com/v4/letter/e/a9a28c/32.png) [@elfkin477](https://boards.straightdope.com/u/elfkin477)\ **Post date:** [September 15, 2016, 12:59am UTC](https://boards.straightdope.com/t/why-would-anybody-pay-to-simply-have-a-bank-account/765902/27 "2016-09-15T00:59:04Z")
When I was in college my bank charged a $5/month fee. It was the only bank within walking distance, so if you wanted to bank near campus, you had to pay up. ---
**Author:** ![Alley\_Dweller](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/alley_dweller/32/430_2.png) [@Alley\_Dweller](https://boards.straightdope.com/u/Alley_Dweller)\ **Post date:** [September 15, 2016, 1:21am UTC](https://boards.straightdope.com/t/why-would-anybody-pay-to-simply-have-a-bank-account/765902/28 "2016-09-15T01:21:54Z")
A few years ago, a bunch of Chase employees made some videos about what it was like to work as a personal banker at Chase. They are pretty hilarious, but provide insight into life as a banker. These videos contain coarse language that may not be suitable for work: [spoiler] [Morning Huddle/ 1-2-3 Drill](https://www.youtube.com/watch?v=LItMPAYo2NU) [The 1-2-3 Drill](https://www.youtube.com/watch?v=GX531n5Als8) [/spoiler] “DDA” is demand deposit account, better known as a checking account. “PVC” is Personal Value Credit. Each banker is awarded PVCs based on the products he manages to sell. Different products have different PVC values. Bankers are given a quota of PVCs to earn and receive bonuses for exceeding their quotas. ---
**Author:** ![Kiyoshi](https://avatars.discourse-cdn.com/v4/letter/k/e19adc/32.png) [@Kiyoshi](https://boards.straightdope.com/u/Kiyoshi)\ **Post date:** [September 15, 2016, 4:43pm UTC](https://boards.straightdope.com/t/why-would-anybody-pay-to-simply-have-a-bank-account/765902/29 "2016-09-15T16:43:43Z")
> [@md2000](#): > > I recall something in the British news several years ago, where one of the newspapers opened an account with 100 pounds in several of the bigger banks in Britain; then waited to see how many months (not years, months) before it was all gone to fees. Are you sure it was in the UK? Our banks don’t charge you to have an account, unless it’s some kind of “platinum” package which includes various stuff like travel/home contents insurance. I guess the banks cover their admin costs by collecting interest on your money. You used to get interest on your current account (checking account), but that stopped around the time of the Great Recession. And of course they make plenty of money from overdraft fees, loan interest, and so on. Until reading this thread, I never even knew that banks in other countries charged you just to have a bank account! It seems kind of unethical to me to charge for a necessity like that. ---
**Author:** ![doreen](https://avatars.discourse-cdn.com/v4/letter/d/858c86/32.png) [@doreen](https://boards.straightdope.com/u/doreen)\ **Post date:** [September 15, 2016, 5:08pm UTC](https://boards.straightdope.com/t/why-would-anybody-pay-to-simply-have-a-bank-account/765902/30 "2016-09-15T17:08:35Z")
> [@Kiyoshi](#): > > Until reading this thread, I never even knew that banks in other countries charged you just to have a bank account! It seems kind of unethical to me to charge for a necessity like that. Why? I mean there are lots of other necessities that people get charged for, even things that are more necessary than a bank account. You pay for shelter, food, clothing, electricity, medical care , even water in one way or another - either you pay directly or through taxes. And as a general rule in the US, private enterprises can decide how much and how they are going to charge me (banks are regulated, but the regulations allow account fees) So the warehouse store can charge me a yearly membership that gets me nothing but the ability to shop in the store. And a bank can charge me simply for having an account. I suspect that the minimum balances for fee waivers are set because that’s approximately the point where the bank can cover costs and make a profit from the interest on your balance - because in a world with no account fees, there will be a lot of accounts with balances under $200. ---
**Author:** ![Philster](https://avatars.discourse-cdn.com/v4/letter/p/13edae/32.png) [@Philster](https://boards.straightdope.com/u/Philster)\ **Post date:** [September 15, 2016, 6:38pm UTC](https://boards.straightdope.com/t/why-would-anybody-pay-to-simply-have-a-bank-account/765902/31 "2016-09-15T18:38:23Z")
Wells Fargo, as far as I know, still faces the reality of having too much cash, and charges fees for depositing the cash they don’t need. I believe Wells and TD were in similar situations (many national or regional large banks faced the same issue). If a bank is fee heavy on basic accounts, or shove no fee programs that have hidden fees, then they probably have too much cash. To repeat, if they charge you for depositing money and simple/similar services, they don’t make money on your money without fees. > **[In Cautious Times, Banks Flooded With Cash (Published 2011)](https://www.nytimes.com/2011/10/25/business/banks-flooded-with-cash-they-cant-profitably-use.html?_r=0)** > > With fewer attractive lending and investment options, it is harder for banks to make a healthy profit from the enormous amount in deposits. > **[Banks with Too Much Cash Charge for Deposits](https://www.neatorama.com/2011/10/27/banks-with-too-much-cash-charge-for-deposits/)** > > It seems an odd problem to have, this "too much cash" thing. I don't know that most of us can relate. But it seems that in times of economic insecurity, those who used to invest in stocks are simply holding their money in banks, and now bankers are... ---
**Author:** ![actualliberalnotoneofthose](https://avatars.discourse-cdn.com/v4/letter/a/e79b87/32.png) [@actualliberalnotoneofthose](https://boards.straightdope.com/u/actualliberalnotoneofthose)\ **Post date:** [September 16, 2016, 5:07am UTC](https://boards.straightdope.com/t/why-would-anybody-pay-to-simply-have-a-bank-account/765902/32 "2016-09-16T05:07:59Z")
> [@Mister\_Rik](#): > > Do they just live some place where they literally have no other options? Sometimes. Or maybe they burned another local bank in the past, wrote a bad check at any point in the past 3 years, have bad credit, unpaid medical bills, any number of reasons. Then you take what you can get and sometimes can’t even open any bank account. Sometimes they offer incentives and people choose those over the fees. ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [September 16, 2016, 5:48am UTC](https://boards.straightdope.com/t/why-would-anybody-pay-to-simply-have-a-bank-account/765902/33 "2016-09-16T05:48:34Z")
> [@lazybratsche](#): > > Often, those sorts of fees are waived if you’re the profitable sort of customer: if you have a $$$$ minimum balance, or a high enough direct deposit wage, or you use a debit card that earns the bank transaction fees… > > ETA: Straight from the Wells Fargo website, here are the (profitable to them) things that waive the fee: > > My WAG is that piddly $5/month fees aren’t going to generate substantial revenue. Rather, they chase away small-time customers. No bank is going to make any money, at least in the short term, on some kid’s beer money account with a balance that never gets above $200. I have a mortgage with them also, which counts at elevating my account to the next level, but we weren’t paying fees before I got it so I don’t know if it by itself would cause the fees to be waived. I also get a piddling amount of interest on my checking account, but you get piddling interest on CDs these days. ---
**Author:** ![Lord\_Feldon](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/lord_feldon/32/341_2.png) [@Lord\_Feldon](https://boards.straightdope.com/u/Lord_Feldon)\ **Post date:** [September 16, 2016, 7:15am UTC](https://boards.straightdope.com/t/why-would-anybody-pay-to-simply-have-a-bank-account/765902/34 "2016-09-16T07:15:17Z")
> [@Musicat](#): > > Or you just don’t know any better, didn’t shop around, and think that all accounts charge fees. Some of it is surely this. And even if they do know, people will happily pay a little money to avoid the hassle of doing something. There are still a bunch of old people who rent a home phone from the phone company after all. ---
**Author:** ![Mama\_Zappa](https://avatars.discourse-cdn.com/v4/letter/m/71e660/32.png) [@Mama\_Zappa](https://boards.straightdope.com/u/Mama_Zappa)\ **Post date:** [September 20, 2016, 11:29pm UTC](https://boards.straightdope.com/t/why-would-anybody-pay-to-simply-have-a-bank-account/765902/35 "2016-09-20T23:29:23Z")
> [@Alley\_Dweller](#): > > Excerpts from the [6/30/16 Call/TFR report](https://www5.fdic.gov/idasp/advSearchLanding.asp) for the calendar year thru 6/30/16 for Wells Fargo Bank, NA, Sioux Falls SD (all figures expressed in thousands): > > 1. Total interest and fee income on loans 18,334,000 > > h. Total interest income (including loans) 23,924,000 > > e. Total interest expense 1,718,000 > > 1. Net interest income 22,206,000 > > a. Income from fiduciary activities 958,000 > > b. Service charges on deposit accounts in domestic offices 2,875,000 So the fees are not the largest source of income but they are a pretty significant part! Makes sense that they charge fees where they can because they’re pure profit. We bank at a credit union. Almost no fees at all. We _do_ have a very, very small deposit account (300 bucks) at a local branch of a “real” bank simply because they offer safety deposit boxes and having an account cuts the cost in half. If we don’t maintain the 300 minimum there is a 5 dollar a month fee. The interest is a joke - literally a penny a month - but it saves us 90 dollars a year in box rental. If not for that, we would certainly not maintain the account. I can see paying a fee if that’s the only way you can get access to a bank with local branches. Some people prefer that to online banking - and occasionally there are times where you really do need to see someone in person. The big banks like Wells Fargo, Bank of America and Shitibank have branches all over the place. ---
**Author:** ![iamthewalrus\_3](https://avatars.discourse-cdn.com/v4/letter/i/258eb7/32.png) [@iamthewalrus\_3](https://boards.straightdope.com/u/iamthewalrus_3)\ **Post date:** [September 22, 2016, 10:26pm UTC](https://boards.straightdope.com/t/why-would-anybody-pay-to-simply-have-a-bank-account/765902/36 "2016-09-22T22:26:53Z")
> [@Exapno\_Mapcase](#): > > Banks are in the business of making loans. Everything else is purely incidental. I recently got a loan from Wells Fargo, and they offered me a discount on the rate if I opened a checking account with it. So, they already had me on the hook for their profitable business, but decided to forego ~$800 a year (well, in the first year. Less over time) to get me to open a checking account. Didn’t make any sense to me, but I was happy to take it. But I think it means that the banking business is complicated and intertwined, and not as simple as just loans. ---
**Author:** ![Rick\_Kitchen](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/rick_kitchen/32/522_2.png) [@Rick\_Kitchen](https://boards.straightdope.com/u/Rick_Kitchen)\ **Post date:** [September 22, 2016, 11:28pm UTC](https://boards.straightdope.com/t/why-would-anybody-pay-to-simply-have-a-bank-account/765902/37 "2016-09-22T23:28:43Z")
I was just looking at the pitiful interest I’m drawing on my Bank Of America savings account and went to look at CDs - their BEST CUSTOMER interest rate is .5% annually. So I went to look at the best CD interest rates being offered at any bank, and nobody is paying more than 1.5%. ---
**Author:** ![kanicbird](https://avatars.discourse-cdn.com/v4/letter/k/5f8ce5/32.png) [@kanicbird](https://boards.straightdope.com/u/kanicbird)\ **Post date:** [September 22, 2016, 11:39pm UTC](https://boards.straightdope.com/t/why-would-anybody-pay-to-simply-have-a-bank-account/765902/38 "2016-09-22T23:39:34Z")
I have a $2/month fee jsut because they started charging it and I was too lazy to switch - and it was not worth the time, but I should and really just because I didn’t complain, I no longer like this bank and my loyalty is over with them for doing this because I know they offer a free account if I go through the trouble of switching. ---
**Author:** ![Alley\_Dweller](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/alley_dweller/32/430_2.png) [@Alley\_Dweller](https://boards.straightdope.com/u/Alley_Dweller)\ **Post date:** [September 23, 2016, 12:05am UTC](https://boards.straightdope.com/t/why-would-anybody-pay-to-simply-have-a-bank-account/765902/39 "2016-09-23T00:05:13Z")
> [@Rick\_Kitchen](#): > > I was just looking at the pitiful interest I’m drawing on my Bank Of America savings account and went to look at CDs - their BEST CUSTOMER interest rate is .5% annually. > > So I went to look at the best CD interest rates being offered at any bank, and nobody is paying more than 1.5%. You might want to look here: [CD rates](https://www.depositaccounts.com/cd/5-year-cd-rates.html) [Savings Account Rates](https://www.depositaccounts.com/savings/) ---
**Author:** ![Exapno\_Mapcase](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/exapno_mapcase/32/1051_2.png) [@Exapno\_Mapcase](https://boards.straightdope.com/u/Exapno_Mapcase)\ **Post date:** [September 23, 2016, 1:28am UTC](https://boards.straightdope.com/t/why-would-anybody-pay-to-simply-have-a-bank-account/765902/40 "2016-09-23T01:28:06Z")
> [@iamthewalrus\_3](#): > > I recently got a loan from Wells Fargo, and they offered me a discount on the rate if I opened a checking account with it. > > So, they already had me on the hook for their profitable business, but decided to forego ~$800 a year (well, in the first year. Less over time) to get me to open a checking account. > > Didn’t make any sense to me, but I was happy to take it. But I think it means that the banking business is complicated and intertwined, and not as simple as just loans. They want your next loan as well. [Previous page](https://boards.straightdope.com/t/why-would-anybody-pay-to-simply-have-a-bank-account/765902.md?page=1) [Next page](https://boards.straightdope.com/t/why-would-anybody-pay-to-simply-have-a-bank-account/765902.md?page=3)