BofA to roll out new accounts, fees in 2011
Bank of America Corp, scrambling to regain revenue lost from new regulations, plans to start charging fees on new types of accounts to be introduced in the second half of 2011.
January 06, 2011 / 09:05 IST
Bank of America Corp, scrambling to regain revenue lost from new regulations, plans to start charging fees on new types of accounts to be introduced in the second half of 2011.
Customers will be able to avoid fees by giving enough business to the bank every month -- for example, keeping a big enough balance in their checking account, or using a Bank of America credit card monthly. For some accounts, customers receiving electric statements and refraining from using tellers will be able to avoid monthly fees.The bank is setting up four tiers of accounts for clients, compared with its prior three-tier system. It is setting up a pilot program for this new account structure in Arizona, Georgia and Massachusetts, with plans to expand the program nationally later this year.The Dodd-Frank financial reform bill signed last year restricts the fees banks can charge merchants for processing debit card transactions, spurring many consumer banks to look for ways to make up for the lost revenue."It is a big migration for us," said Joe Price, Bank of America's consumer bank chief. "We're trying to take the company to its next phase in its evolution."Price said the provisions of the Dodd-Frank Act play a part in how the bank will adjust its account structure going forward, particularly if caps on debit card fees charged to merchants are implemented, according to a recent Fed proposal."(The proposed rules) don't really provide payment for providing the service," he said, noting a 12 cent cap proposed by the Fed could force the bank to change its consumer deposit pricing to recover lost revenue. "There's no question it would affect how we think about our deposit pricing."For years under prior Chief Executive Kenneth Lewis, the bank focused on aggressively adding new accounts, either through buying other banks or through signing up customers in its own branches.But just adding new accounts could be a tough way for the bank to grow now because it is so big. The largest US bank currently has 5,900 branches, 18,000 ATMs and roughly 10% of all US deposits.Now, under current Chief Executive Brian Moynihan, Bank of America is trying to earn more revenue from its existing customer base, through selling them more products and services.Price said the new structure is, in part, designed to provide incentives and reward customers who do more business with the bank.The new accounts will be segmented into four groups called: essentials, ebanking, premium and preferred.As part of the restructuring, Bank of America is also introducing a rewards program for customers with more than USD 50,000 in total assets at the bank, dubbed Platinum Privileges.Under the new system, monthly fees will be charged for all accounts, but can be waived through a mix of minimum monthly deposit transfers, regular use of a BofA credit card, or minimum account balances. A company spokeswoman said fees, if charged, would range from USD 6 to USD 25 per month.The new accounts will be segmented into four groups called: essentials, ebanking, premium and preferred.As part of the restructuring, Bank of America is also introducing a rewards program for customers with more than USD 50,000 in total assets at the bank, dubbed Platinum Privileges.The two lowest tiers -- essentials and ebanking -- will both offer one checking account with a debit card.The essentials account, the lowest, will include most of the online banking services and come with a mandatory monthly fee, which is still being finalized.The ebanking account -- already available nationally -- waives a monthly fee if customers opt to not receive paper statements, and make all deposits and withdrawals through ATMs.But the bulk of customers, Price said, will fall under BofA's new enhanced account structure, which allows customers to have up to two checking and savings accounts. Customers' monthly maintenance fees will be waived if they maintain a combined deposit balance of USD 5,000, deposit USD 2,000 per month into an account, or use a Bank of America credit card once a month.In contrast, premium account holders can have up to four BofA accounts. The monthly fee would be waived with a minimum USD 20,000 deposit balance with BofA or Merrill Lynch's brokerage, and hold a BofA mortgage.Premium account holders would receive fee waivers and discounted banking services, along with an interest-bearing checking account.Currently, the bank offers two types of personal checking accounts, and both require minimum deposit balances.So-called MyAccess checking requires a USD 1,500 deposit balance, or a monthly direct deposit to avoid an USD 8.95 monthly fee.BofA's Advantage checking account requires a USD 10,000 balance, or USD 15,000 in a brokerage account or credit line to avoid a USD 25 monthly fee. That account, however, does pay interest to customers.BofA also currently offers the new ebanking account to customers nationwide. Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
