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After hitting up taxpayers for billions of dollars in bailouts, big banks are planning to pay back their U.S. customers the only way they know how: by raising bank fees.

Last week, the The Wall Street Journal announced that Bank of America (NYSE: BAC  ) would soon impose fees on checking accounts and other basic banking services. The bank will reportedly test various new pricing models for the remainder of the year before deciding on a fee strategy in early 2011.

B of A wouldn't be the first bank to eliminate free checking. WSJ cited Fifth Third Bancorp and TCF Financial (NYSE: TCB  ) as having replaced free checking accounts with accounts requiring minimum balances or certain transactions to waive monthly fees in the $5 to $15 range. Wells Fargo (NYSE: WFC  ) has also started moving away from free checking in some areas, such as California, with some additional changes slated to take effect July 1.

Setting a trend
What bank customers need to realize is that banks are in business to make money, and big banks in particular both want and expect to make big money. I've already commented on the back-and-forth between big banks and Congressional lawmakers about limits on other types of bank fees, such as overdrafts and ATM charges.

So when credit card legislation makes it harder to take advantage of debt-ridden borrowers with higher rates and exorbitant fees, you really shouldn't be surprised when Barclays (NYSE: BCS  ) and American Express (NYSE: AXP  ) start trying to replace that revenue with cards that carry high annual fees. When proposed cuts on interchange fees threaten the business models of Visa (NYSE: V  ) and MasterCard (NYSE: MA  ) , they're going to find some way to fight back as well.

In other words, as long as you insist on being a customer of the biggest financial institutions in the country, then prepare to be fleeced. Because in all likelihood, that's what's going to happen in more and more ways, as big banks scurry to keep their shareholders happy.

Or pick what's behind door No. 2
Fortunately, there's an alternative, one that should come naturally to ordinary citizens who've responded to such situations time and time again. It's really quite simple: Take your business elsewhere.

Once upon a time, I had most of my money parked in an account at Washington Mutual. It certainly qualified as a big financial institution, but it poked fun at the way its competitors nickled and dimed their customers to death. With its competitors charging higher fees and paying lower rates, going with WaMu was a no-brainer.

Since WaMu's ugly end, though, I've increasingly turned to credit unions for my banking needs. With many credit unions, free checking is just the tip of the iceberg. In many cases, you'll find better rates than you can find from even the top-paying banks, and credit union accounts carry federal insurance with the same limits as the FDIC provides for bank deposits.

Once purely local, credit unions with a national scope are plentiful, and thanks to the Internet, you don't need to be near a branch to get just about everything you'd ever want from a banking relationship. Best of all, credit unions are not-for-profit entities designed to benefit customer members rather than maximize shareholder profits.

As an alternative, you can find plenty of small, locally owned banks that still have a commitment to service and savings. The risk there is that bigger banks will swoop in and take over, as they have in the past. But in the aftermath of the financial crisis, it's less likely that big banks will want to raise the scorn of Main Street customers by grabbing hold of their little counterparts to get even bigger.

You have the power
It's easy to complain about big banks and the power they wield. But in reality, those banks are only as strong as their customers make them. If you're fed up with what your bank is doing to you, don't despair. Just take a look around. With a little effort, you'll find exactly the services you need at a price that's right.

Tune in every Monday and Wednesday for Dan's columns on retirement, investing, and personal finance.

Fool contributor Dan Caplinger misses those old WaMu commercials -- and its higher rates. He doesn't own shares of the companies mentioned in this article. American Express is a Motley Fool Inside Value pick. Try any of our Foolish newsletter services free for 30 days. The Fool's disclosure policy loves to hike but will stay by your side.

Read/Post Comments (20) | Recommend This Article (19)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On June 21, 2010, at 3:06 PM, wasmick wrote:

    "Once upon a time, I had most of my money parked in an account at Washington Mutual. It certainly qualified as a big financial institution, but it poked fun at the way its competitors nickled and dimed their customers to death. "

    How'd that business model work out?

    Jokes aside, a credit union - where available - is a much better option than many small regional banks that - while appearing to be a better option because they're not amongst the uber-hated TBTFs - are currently sagging under the weight of their CRE portfolios.

  • Report this Comment On June 21, 2010, at 6:00 PM, Camacam wrote:

    The big banks don't need sympathy but how'd you like to run a business in which a non-share holding director insisted on policies that limited the price you could charge on several of your most popular products?

    BTW most banks have by now paid back the "bailout" funds that many were forced to take in the name of propping up the system when in fact not all of them needed or wanted it.

  • Report this Comment On June 21, 2010, at 6:24 PM, dyadco wrote:

    Ha ha Ha !!

    I'm laughing because here in Australia, the banks, ALL of the major 4, who were never caught up in the GFC nor ever had any run on deposits, have been systematically raising their fees for years.

    As an example:

    if you actually go to the bank's counter: .80cents

    if you overdraw your account, even by 1 cent: $37

    to actually HAVE your account: from $2.50 - $40 per month

    Oh, and what interest do they pay us: approx .25%...yes, POINT 25%.

    They pay their CEO's millions.

    They treat their customers like dirt.

    Anyway, there is now a class action here in Australia against the bank's "overdrawn" fees. The lawyers are looking at claiming back Billions of dollars in excess charges.

    Oh, AMEX charges me $4400 pa annual fee for my Centurion Card. The highest annual premium on earth.

  • Report this Comment On June 21, 2010, at 6:25 PM, DJDynamicNC wrote:

    There's a growing grassroots movement in this direction - is the main page of the group - and it's encouraging to see. The Millenial generation in particular is jumping on this social media-fueled trend, just as they have been at the forefront of a lot of the recent positive movement we've been seeing as a society. I just hope they're not too late!

  • Report this Comment On June 21, 2010, at 6:28 PM, DJDynamicNC wrote:

    @Dyadco - wow! That's ridiculous. I had no idea it was that bad down there.

    Perhaps you could get a credit union movement off the ground there?

  • Report this Comment On June 21, 2010, at 7:27 PM, maccdw wrote:

    Aside from my mortgage, which I paid off in '08, It's been 15 years or more since I had any $ in a bank. Been a happy CU customer for over 30 years. Won't ever put a penny into a bank, except indirectly (safekeeping by my brokers, so it's unavoidable to a degree).

    " unions are not-for-profit entities designed to benefit customer members rather than maximize shareholder profits."


  • Report this Comment On June 21, 2010, at 7:30 PM, rse0506 wrote:

    @Dyadco - Sounds like OZ needs a LOT more competition in the banking space. I somehow suspect that if you look around you will find entrenched monopolies in that field. You either have choices, or somebody has hold of you by your privates...


  • Report this Comment On June 21, 2010, at 7:53 PM, rd80 wrote:

    For the flip side - I have checking and brokerage accounts at Wells Fargo and have never paid them a fee. That includes brokerage commissions.

    I'll move the accounts if and when that changes.

  • Report this Comment On June 21, 2010, at 8:02 PM, maccdw wrote:

    rd80, you've made less than 100 trades at WF?

  • Report this Comment On June 21, 2010, at 8:40 PM, Camacam wrote:

    Interesting that all you capitalists are buyig into the socialist model.

  • Report this Comment On June 21, 2010, at 9:12 PM, rd80 wrote:

    maccdw - less than 100 a year.

  • Report this Comment On June 21, 2010, at 9:38 PM, mountain8 wrote:

    "A democracy is always temporary in nature: it simple cannot exist as a permanent form of government. A democracy will continue to exist up until the voters discover that they can vote themselves generous gifts from the public treasury. From that moment on, the majority will always vote for the candidates who promise the most benefits from the public treasury, with the result that every democracy will finally collapse due to loose fiscal policy, (which is) always followed by a dictatorship.”

    Alexander Tyler (maybe)

    Translation for the historically challenged:

    Democracies have historically never lasted more than about 200 years. The US is overdue.

    Democracies have historically always been superceded by semi-socialism, i.e. Welfare, free medical, etc.

    From there, because in socialism nobody has any drive to excel, society is replaced by dictatorship, usually a huanta, revolution, invasion, etc, and usually not peacefully. Then it starts all over.

    Which means, "those who don't learn from history are doomed to repeat it."

    Where do you think that puts us?

  • Report this Comment On June 21, 2010, at 10:06 PM, dyadco wrote:

    Dear DJDyanamicNC and rse0506,

    yes, it is a big issue here and because many customers got scared with all the news coming out of the US during the initial stages of the GFC, the 4 majors (biggest) banks here got the vast majority of the business and many smaller banks, in reality ALL, were taken over or bought out by the 4 majors.

    It is a monopoly situation here....but signs of change.

    Yes, Credit Unions are here and interestingly, I swapped all of our accounts to them last year...but they don't have the traction in the marketplace to attract huge funds and many people are still concerned about their safety....without reason.

    But the industry here does need a shakeout....BIG time !!


  • Report this Comment On June 22, 2010, at 9:37 AM, wasmick wrote:

    "Local community banks and credit unions are likely to hang onto free checking longer than their bigger rivals. That is because such institutions will see less of a financial impact from some of the new regulations, and therefore may be under less pressure to add fees. Smaller banks often promote themselves as being customer-friendly, with products that are less complicated than those offered by big banks."

    Whoa....that's a whole lotta maybes, possiblys and perhapses. While I support Credit Unions...the idea that small, regional banks are less profit driven is somewhere between naive and completely laughable.

    Hey, but at least they're honest in their duplicity, they've got Michael Moore on their side. And who's more honest, forthright, charitable and generous than him?

    Oh that's right......pretty much everybody..

  • Report this Comment On June 23, 2010, at 10:04 AM, AnotherNavyFool wrote:


    I have to agree with you wholeheartedly on this issue.

    When I first joined the Navy, I signed up with Navy Federal Credit Union, mostly becuase I was a young kid who really didn't know the difference between banks and credit unions, they would deposit my pay there, and it was on base, where I had to live. I still have that same account and I am very thankful the Navy suggested I sign up. NFCU has gotten bigger over the years and expanded (not to mention has offices and ATMs in some places I have been that do NOT have American bank offices).

    Free checking and a good credit card with a low interest rate (sitting at 7.9% now - when I use it) are just some of the nice parts about having that account. I also had an account with another credit union when I was a teacher, as did my wife. It was also good, not quite up to NFCU, but still better than ANY bank.

    I currently use USAA for my insurance and most of my banking now. They are not a credit union, but actually do better than one in many ways. I do all my banking on-line, they give me interest on checking (yes, really!) which is also free, a decent rate on savings, special accounts for my kids to save with, pay me for ATM charges (since they don't have storefronts) and currently I get 0.5% back on everything I buy with my debit card used as a credit card (between $11-$17 cash directly in my account - Foolish!). My credit card through USAA is also great, currently at 6.0% interest. I also have free on-line bill pay. I also bought one of my cars with a USAA loan at a rate the Honda dealer couldn't beat AND with included gap insurance. And, incidentally, they have excellent insurance programs, too.

    The last time we had a "bank" account was when I was deployed after 9/11 and we weren't sure where we going to be living for a while. My wife insisted on being able to get to storefront bank, at least for the kids' accounts. After seeing that my USAA account was paying more interest on savings in a MONTH than "Stank of America" was on my kids meager accounts in a YEAR - and charging fees - we closed those out. And even then, the teller was giving my wife a hard time about getting the money!

    Traditional banks need to get with the program and realize that the success formula from these two companies, among others, is that they either are not for profit (obviously not a choice for banks) or do not put profit over taking care of your customer. Throw in the age of electronic banking and a quickly decreasing need to go to an actual bank and the dinosaurs of banking that need to feed on the money their customers give them for safekeeping are doomed.

    No, I am not a pitchman for either of those companies (and do use others for different financial needs), but I AM a HAPPY, LONG-TERM customer. Until banks stop punishing ME for giving them MY money - and do better than the two companies I am with - I will not be going anywhere near their banks, except maybe to use their ATMs, which I get reimbursed for...

    @dyadco - Ouch! I really hope electronic banking takes off down there so you guys get some choices. I have a couple friends from Down Under, but they never mentioned how bad it was (then again, they like Vegamite and got me to try it - bleah!). Good luck with breaking the grip of the banking villians down there.

    @mountain8 - I agree with your sentiment, but I am curious as to which deomcracies other than ours that have lasted more than 200 years - and went through the cycle - you seem to imply we are doomed to follow? And as far as the US being due, I would have to say that little dust-up we had from 1861-1865 fundamentally challenged and changed our country. Maybe we set the clock back a while on our 200-year expiration date. I for one am not ready to give up on what we have (or I wouldn't be sitting in the Sandbox writing this). Just because we have some turmoil and an administration that is not universally popular (like that's new) and some financial hardships (never happened before, either, right?), let's not panic. America's a good ship and like any ship, she needs constant care and vigilance by those who sail her to remain seaworthy. Sometimes you just need some paint, sometimes you scrape the bottom, sometimes you even have to bail water, but the hull is intact and will get us through the all the storms the world can throw at us. You have to believe that and work toward it - we all do. There are no better ships out there.

    To paraphrase from a diversity quote I saw once, "We all came here in different boats, but now we are all in the same boat together" - and it behooves us ALL to do what we can to keep it afloat.


  • Report this Comment On June 23, 2010, at 4:47 PM, mountain8 wrote:

    Try Rome/Italy or Greece. There are exceptions if one were to dig deep enough, but I don't know who they are. I didn't write the quote.

    Either way the logic of the statement is valid. What is it now, 60%+ of our GNP goes to entitlements, including my own? Even if I were allowed and able to go back to work, the net worth of what I recieve now is higher than what I would earn, or have ever earned, in the job market. I'm bored to tears with my forced retirement but would lose everything if I tried to reenter. And my skills are 10 years gone. I wouldn't qualify to work anywhere except Walmart or Mcdonalds.

    That 60% is what has caused closure of schools and firing of quality teachers in my area. Firehouses have been closed. Street conditions are atrocious. Our state house looks dilapidated.

    If the welfare/medical setups were made as accessories or adendi to our normal lives that might work, but right now, it's a way of life.

    I'm not publishing that we are doomed, but all indications are we are on that track. Congress hasn't made a progressive move in decades, except in entitlements. We are going to lose it all because we are all individually selfish. "Cut anything but my stuff." "Replace oil but don't build those wind farms in my back yard". "Fight crime, but don't build a prison in my area." "The banks caused the global financial collapse but my money's still in there."

    I'll go on record right now that even though entitlements are my only income, I'm willing to accept an ACROSS THE BOARD 10% decrease in my entitlements in order to not lose it all in the next decade or two.

    Don't know about the Civil War. Seems to me we are still fighting it.

    Here's another fun quote: "The poor will always be with us."

    Jesus Christ.

    All these 'end poverty' groups are totally anti-christian.

  • Report this Comment On June 23, 2010, at 10:35 PM, OlofLofo wrote:

    I know the rates could vary, but the 1.40 APY savings account from Sallie Mae and the 1.35 APY from CapitalOne are looking pretty good right now. If I'm looking to get a high rate on a small amount of money while keeping it liquid, is there any reason I -shouldn't- do business with Sallie Mae? Other than the possibility of a customer service desk in Mumbai, is there a hidden catch somewhere?

  • Report this Comment On June 26, 2010, at 10:54 AM, mountain8 wrote:

    Cap One just trippled the interest they charge on credit cards. Sallie hasn't paid a dividend in two years and has lost a total of $2.57/share over the last three years. Of course they can pay you such a high return. They are robbing everyone else.

  • Report this Comment On June 28, 2010, at 7:29 PM, KvHagedorn wrote:


    Why do you choose to be an Amex Centurion member? Since you are frugal enough to complain about bank fees, how do you justify paying Amex $4400 per year for the privilege of carrying their boutique card? They keep trying to get me to upgrade to the platinum card, but I just can't justify the expense.

  • Report this Comment On July 06, 2010, at 2:10 PM, ryounger wrote:

    You are comparing Credit Unions to community banks which is fair on one level. Credit Unions have expanded their reach, relaxed membership requirements and are trying more and more to act like a bank competing head to head for customers. As a non-profit business they have a distinct advantage over the cummunity bank they are competing with, they do not pay taxes. They money hungry community banks pay over 30% for taxes while trying to offer competitive pricing, community service and support, and yes, a reasonable profit for investors/shareholders. Credit Unions continue to move well beyond the scope of services that they were originally chartered for while still enjoying the competitive advantage of paying no taxes. They walk like a bank, talk like a bank, but don't have to play by the same rules as a bank. I am sure as a customer you could care less if they have a competitive advantage, an unlevel playing field, as long as you are benefitting personally. Not so if you are trying to compete and provide the same services with higher costs

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