MEANING OF BANK FEES
A fee is
the price one
pays as remuneration for
services . Many banks charge nominal fees for various services and as penalties to customers. There are unauthorised overdraft fees, ATM usage fees, fees for having an account balance under a
required amount, requesting a deposit slip or
notarizing a document etc.
Some banks charge a fee for using tellers in an effort to encourage customers
to use automated services instead. Bank fees
generally constitute a major portion of revenue for the bank, particularly for
regional and local branches.
INTRODUCTION
The fees have come in
for criticism as excessive from consumer advocates. They have also targeted
bank practices that maximize the assessment of fees and fees that can add up to
many times the amount of small transactions. U.S. banks extract fees from automatic teller machine transactions that are made at other banks. Customers
are sometimes charged twice, both by the bank that owns the ATM, and again by
their bank. Like, Bank of America charges
a denial fee, literally a
fee for insufficient funds, and a fee to simply check the account balance at
other bank's ATM. When Bank of America announced these plans to
charge regular banking customers a $5 monthly fee to use their debit card
created a wave of public criticism.
When Banks are in financial trouble, they might see
boosting fees or attaching new strings to new accounts as a way to quickly
raise millions. The banks make money by providing loans and through
debit/credit fees charged to retailers. Micro Finance Institutions (MFIs) that claim to be helping poor
people nevertheless charge them interest rates that are considerably above the
rates richer borrowers pay at banks.
Following the 2008 financial crisis and legislation passed by Congress,
banks have modified many credit card agreements with customers sometimes
increasing interest rates or
reducing credit limits.
DISCUSSION
The banking industry as a
whole earned nearly $30
billion last
year from overdraft fees on debit cards and checking accounts. Two years ago
almost all banks offered free checking, but now situation changes. Since
the recession and financial crisis,
banks have been making more money from consumer fees.
Banks can be better public institutions by
offering products that don’t exclude major population groups. About 40 million Americans have no bank accounts.
Banks’ high fees and exclusionary rules are a big part of the reason. It’s hard
enough for low-income families to save and high balance requirements make it
even harder. The low income group is also the
group that is likely to have a poor credit history. There are some hints of how much
money is flowing from America's poorest families to banks. In 2008,
California's welfare families paid $8 million in surcharges to access
their cash welfare benefits. Surcharges paid by welfare recipients will exceed
$16 million this year.The check-cashing industry is worth more than $40 billion a year. Banks making excessive fees a key part of their
ever-evolving and often-exploitative business model.
When researchers asked low-income families
why they don’t have a savings account, only 37% said it was because they
couldn’t save. Nearly 29% said that lower fees would encourage them to open a
bank account.
With regard to banking, many
people with a bank account appear to be involuntarily banked, coerced either by
employers or the state into having the product. Banks are saying because
of new technology implementation, our cost has gone up and we cover these costs
from customers in form of Bank fees.
Also “The Reserve Bank of India (RBI) deputy governor K.C. Chakrabarty” criticized
banks on earning heavy fees by selling insurance cover to their customers.
The RBI deputy governor said that with improving technology, banks should be
able to offer more cost-effective services to clients rather than pulling back
on existing services or increasing the cost of such services for customers.
It was also discussed that the problem here is
not only the bank fees; the problem is
low income also. Forcing banks to give away some of their services for free
will not improve the income-earning ability of low-income earners.
CONCLUSION
According to me, Banks
fees obviously exploit the poor. Banks charges fees in the form of
overdraft fees, ATM usage fees, Balance checking fees etc. Banks should change
their credit appraisal process and by only knowing a customer is not enough, it
should know the business of the customer as well. This knowledge of customers
business will lead to better credit delivery system. It should adopt new
technology in better way.
Banks should
think about services to poor communities as an investment in customers, which
could pay handsome dividends in the future as these customers’ families turn to
trusted sources for future financial services. Banks
need to put themselves in the shoes of the typical customer and create products
and services that generate profits as a result of customer success and delight.
Fees should be monitored, but they need to be analyzed in the context of the
overall customer experience.
Banks has to accept the moral obligation to
lower barriers to economic prosperity for the nation’s most vulnerable
communities. Banks are the backbone of our economy and should have the
obligation to provide low income people with low cost savings and checking
accounts, but not credit or financing to people with poor credit history.
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