July 8, 2020

CT Watchdog: Bank Charges

As banks are forced by regulators to curtail overdraft fees where they have made billions of dollars in profits, they are using the old checking account to boost their income by eliminating free services or requiring higher minimum cash held in accounts.

One of the first to feel the effect of this change is William Norton of West Hartford, who until recently had been a happy customer of Webster Bank.

He took out a mortgage from Webster because the Waterbury-based bank had promised him a .25 percent discount on his mortgage as long as he had the mortgage payments withdrawn automatically from his free checking account.

However, he was notified in early October that the bank was unilaterally changing its policies and would begin charging $8.95 a month for his checking account unless he kept at least $1,000 in it, or used his debit card monthly.

Webster Bank spokesman Ed Steadham said the bank has every legal right to change its checking account policy, and he said Norton is still getting a good deal.

No question about it, but that is not the way Norton sees it, and he says he will end his relationship with Webster.

“To sign people up for something as significant as a mortgage under the terms they did and then “change the plan” seems like a bait and switch to me.  As far as it being a good deal, that is absolutely ridiculous.  I agreed to keep the free checking account open for the mortgage and they’re now charging a fee,” he wrote me. “What’s to stop the bank from saying that free account now has a monthly fee of $20 or even $30?”

He said he will  refinance his mortgage with another lender and move all his business to a bank that doesn’t charge a fee for having a checking account.

It’s a tactic that many others are likely to take as the large banks look to make money off their smaller customers, who they used to hammer by charging $35 every time they overdrew their checking accounts.

That trend was backed up by a study made public recently by Bankrate.com, which found a “reversal of an industry wide, nearly decade-long trend toward widespread adoption of free noninterest checking.”

Besides federal regulators requiring banks to get customers’ permission before overdraft protection can start, banks are also being limited on the interchange fees that they charge for debit card protection.

“It’s no surprise we’re seeing higher balance requirements and higher monthly service fees on the heels of this legislation that is really working to crimp these two revenue streams that banks have come to rely on,” says Greg McBride, CFA, senior financial analyst for Bankrate.com.

Besides those in the low-income group, children’s and students’ account are being impacted.

“We received notice that my children’s free checking account is switching from a totally free checking to a Webster Value Checking effective Nov. 5,” another reader wrote me. “They now want a minimum balance of $1,000 in the account or they will charge $8.95 a month.  I do not understand why they do not institute the change for new accounts only. What student can keep a minimum of $1000.00 a month, plus my son is in the Army and how will he change this?”

Hopefully some banks will use free checking accounts as a way to increase the number of customers, especially among young people. A quick Internet check shows that even now there are at least two banks in Connecticut that are offering free checking: Citizens Bank and Windsor Federal Savings. Check your credit unions also.

Aldi Debit System Hacked

Scores of Aldi grocery store customers are reporting having hundreds of dollars or more illegally taken out of their checking accounts after using their debit cards at an Aldi store, including ones in Connecticut.

One reader from West Hartford told me his account was hit for $3,500.

Many reported that they only learned recently that their accounts were targeted.

Some only learned about it when they attempted to use their debit cards believing there was still money in their accounts, and their purchases were declined.

Federal investigators have said that Aldi was victimized by repair workers who planted devices inside card readers to steal customer information.

If you shopped at Aldi’s in the last few months it would be worth your while to check your account to make sure you weren’t victimized.

You can reach The Watchdog at George@connecticutwatchdog.com and he will answer as many emails as he can. Please check out his site, www.ctwatchdog.com for comprehensive consumer, health, finance, media, internet, computer, travel and education tips.