Bank of America revamping accounts, fees

By the second half of the year, existing Bank of America customers will see offers for accounts with new perks and services.

The new accounts don’t exactly line up with Bank of America’s current offerings, but some will require higher balances or more use of other bank services to avoid fees.

Other big U.S. banks also are eying such changes, banking experts say, as financial regulatory reforms pinch some fees, such as overdraft levies, that have subsidized free checking and debit cards. Banks have also faced a slowdown in other lines of business such as loans.

“Nothing’s going to be free anymore. Free checking is dead and gone, or if it isn’t yet, it’s going to be soon,” said Jennifer Tescher, president and CEO of Center for Financial Services Innovation.

BofA said the new offerings respond to changing customer preferences and provide greater flexibility and transparency about services and the ways customers pay for them.

They also offer greater rewards for high balances or for opening brokerage accounts with Merrill Lynch, now owned by BofA.

BofA currently offers checking accounts with tiered conditions that allow all customers to avoid fees.

The new most basic checking account will include a monthly maintenance fee of around $9, about the same as the closest comparable account now. But there is no way to avoid the fee in the new version.

Other new accounts will have fees ranging up to around $15 per month, but with ways to bypass the levy by having higher account balances, using a credit card once a month or perhaps by having a mortgage with the banking conglomerate.

Susan Faulkner, BofA’s deposit and card product executive, told The Atlanta Journal-Constitution, the accounts “allow customers to choose how they bank.”

“The point is we’re giving the customer options of how they want to bank with us given the economic realities,” Faulkner said.

Wells Fargo, now No. 2 in metro Atlanta after its purchase of Wachovia, eliminated free checking for new customers late last year, and other banks have put minimum thresholds for balances or forced customers to use direct deposit to keep free checking.

Industry observers have been waiting to see the first major overhaul of checking by banks to recoup revenue to be lost from reform.

Bank of America, which had been profitable for the past year, reported a $7.3 billion loss in third quarter, taking a $10.4 billion non-cash charge related to the impact of regulatory reform on its credit and debit card business.

“The prospect of higher fees always goes over like a lead balloon,” said Greg McBride, senior financial analyst with Bankrate.com. “Fees have been the reality for the last decade and will be the reality for the next decade. But what’s important for consumers is there are plenty of ways to avoid those fees.”

Tescher, briefed on the plan Tuesday, said while no one wants to pay fees, BofA has done a good job to “spread the pain and provide a level of transparency” to customers.

Georgia already was the test bed for one of the four accounts, an eBanking account BofA rolled out nationally in August. It requires users to do virtually all their banking online or through ATMs. Paper statements or face-to-face service come with an $8.95 monthly fee.

The new Enhanced account, which Faulkner said would be the bank’s most popular, would offer clients multiple linked savings and checking accounts. To avoid fees, it would require a $5,000 minimum balance across accounts, or for customers to use their BofA credit card or have $2,000 or more deposited each month.

The bank’s new Premium account, for affluent clients, would be free with a $20,000 combined balance between personal accounts or certain Merrill Lynch brokerage accounts, or with a mortgage with BofA.

Don Coker, a banking consultant based in Woodstock, said banks will try to differentiate their products while still coming up with new revenue sources.

“Airlines have made drastic changes in how they charge consumers, but they still fly. Consumers will adjust,” he said.