Why would anybody pay to simply *have* a bank account?

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.

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.

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.


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.

Excerpts from the 6/30/16 Call/TFR report 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

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.

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

The 1-2-3 Drill

“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.

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.

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.

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.

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.

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.

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.

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.

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.

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%.

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.

You might want to look here:

CD rates

Savings Account Rates

They want your next loan as well.