I was a kid in the 80's and would regularly see $5 interest credits on my meager savings, free ATM, free phone banking (don't laugh) and they even set it up for me that if I went below $20 in my checking the system would pull $50 from my savings. 1986 or so - overdraft fees hadn't been invented. After the dot-boom/bust The Fed "aggressively pursued ZIRP (zero interest rate) policies". Mortgages got much cheaper but fees replaced the interest income. Somebody is paying either way. It used to be the loan holders. I even remember my local bank having a stack of a hundred toaster ovens to give to anybody who opened an account. They wanted your business so you would do your loans with them. I quite preferred that America though it might be possible to argue that getting nickel-and-dimed everywhere is overall cheaper. But that was at the height of Americans' real purchasing power from wages and I'm disappointed that my kids had to grow up in the opposite environment. Maybe this will change before they will be shopping for a home. I read recently that real wages (purchasing power) were actually higher during the Great Depression. Soaring highs on the Dow don't matter much to people when all the productivity gains during that period have been transfered to financialized everything to make that NGU. The system needs to be stable for us to all benefit. "The Gini Coefficient is too damn high" as they say.

I agree. But I think we’re stuck with this until a chaotic event happens. It’s really hard to untie some knots through reforms.

My bank doesn't do this and I can't recall any bank that I've banked with for several decades now ever doing this. I do see some banks saying they do this and I wonder why anyone would choose to be their customer because there's plenty of market choice out there in banking.

Likely they do it because they can and it's a vendor lock-in mindset from their customers. People have banked with them their whole life or their parents banked with them etc.. so they feel like this is the better deal. I've seen credit unions doing this. Credit unions talk about how great their services are and how much better it is to be with a credit union but I see them charge all kinds of horrible fees as well. It's also much more difficult to get a hold of someone 24/7 with a credit union if you have banking needs.

I think there's still a lot of legacy banking attitudes like you need to go into an office and sit down and talk to somebody. Which usually necessitates you having to take a day off of work because banker's hours are called bankers hours for a reason. I myself choose to bank with someone who will be available on my schedule not on their schedule.

Slightly unrelated, but in the interest of those who are with one of the banks that charge fees, which bank is it that you use? Would you generally recommend them?

I use USAA now, and have for quite a while. Yes, if you can qualify for a USAA account I absolutely recommend them. They are one of the best banking institutions I've ever had.

But there are several national banks that have similar no fee accounts. Just looking around online at some deals and the one that stands out to me is really good deal is Charles Schwab offers a no fee account. Yes you have to open a brokerage account but that also has no minimums with it as well. Plus it seems they have unlimited ATM rebates.

Some of it may come down to your needs as I haven't had the need to access a local branch in many decades now. I don't deal in large sums of cash and needs a deposit it. I primarily look for a bank that has excellent online access and telephone access.

BOA charges fees for checking. But it is easy to avoid just by having a direct deposit of at least $250 a month.

Interested to know your bank if I may

I don’t know that there’s a single answer, but the replies here are in the neighborhood. Fees of some kind are the only revenue model, so you pick the ones that work for your use case.

Two other thoughts, one speculative/general and one where I know of what I speak:

If you make most of your income off a small group of your customers, then it’s wise the charge some nominal fee on the other customers to get them to breakeven unit economics. (That holds in most any industry, not just finance. Consider the endless think pieces on the problems caused by a high proportion of free users at zoom and Dropbox.) No, you’re not “making big profits” from them, but the point is to make sure your customers aren’t adversely selected. That can mean, “let’s still make something off the people who pay their credit card bill every month.” It can also mean, “overdrafts create manual work in our back office; let’s make sure they pay for themselves and aren’t correlated to our profit margin on the real business, which is lending.”

Area I know more about: for credit cards in particular, don’t underestimate what the annual fee does for the issuer. The psychology of it for the consumer is huge. People will cancel accounts they’re not using, sure. That helps, because forcing unused accounts closed can draw regulatory headaches. But consumers also consider the card more valuable and may be more loyal to it if it costs as much as their Netflix subscription each year. The issuer is making money on other sources—interest, interchange, travel portals, etc. The fee is, for the right type of customer, a kind of marketing device.

If you know what you are doing, the credits that you get for doing things you already do should offset the annual fee even if you don’t use the card. Wander over to r/creditcards.

We have five Delta cards between my wife and myself that we only make one charge a year on for the hotel credits. Just by having the card, we get a buy one get one free plane ticket good for anywhere in the US, Mexico, Central America or the Caribbean. That more than pays the annual fee.

We have over a dozen trips planned this year and we took over a dozen each year since mid 2021. It’s a hint of ours.

I think there are kind of three tiers of financial services:

1. Payday loan tier. It's very extractive and uses lots of fees and interest because getting a cut of whatever money is there now is all that matters.

2. "Normal" tier. There basically aren't fees for typical services, everything is paid for indirectly via interest rates and card fees or marketing other services. The banks I've used since the 2000s have all been like this.

3. "Premium" tier. At this level there's usually a fee to keep out the "riffraff," like with most AmEx.

Do some normal tier providers have fees? I've seen credit unions where there are fees if you don't meet some threshold of services or usage. Or with some non CU accounts where there's a fee if balances don't stay above a certain level. But that's about it. I've also seen I think once or twice set ups where you had to opt in to things like free overdraft protection, but could get charged for it if you don't. But that seem like the fringes, not the norm.

When it comes to banks, there is also a tier where fees are waived for high value customers. For example, checking, atm, wires, are free if you have $50k or more in your checking account.

this is true. makes you question why they do it for them and not for everybody

They want high tier customers and they don’t profit on low tier customers? Your bank can sell a lot of services to someone who has money to spare.

You cannot collect literally billions of dollars in overdraft fees a year if you let everyone do it.

I'm having a hard time wrapping my head around someone someone in business not understanding charging fees.

You charge fees to get money.

Banks are there to make profits.

You say that banks don't make much money off of it, but maybe your idea of "much money" and mine are different.

In my country, it is reported that bank fees make up approximately 5% of bank revenue, and I'm reasonably sure we have less fees than others. I don't know what business or country you're in, but there's a pretty good guess your country takes in more money in fees, and earning a marginal 5% on anything is not chump change.

May I humbly suggest that your premise is wrong. They ARE significant sources of revenue and profit and banks charge them because they are in the business of generating profits.

>Why are banks charging so many fees for accounts and cards?

The answer's exactly the same as from the famous bank robber who eventually confessed as to his motivation for living the high life on ill-gotten gains using the same institutions:

"Because that's where the money is."

Well, somehow not every bank/credit card needs to charge fees to make money.

I have two bank accounts and 5 credit cards - no fees. And I'm not a rich SV programmer either. If I was, I'd probably get one of those fancy cards that does have fees.

Yes, this is product differentiation, features, demand elasticity, network/ecosystem lock-in, loyalty tax etc.

Just as software and internet also has a mixture of free to use, once off, subscription, usage metering and fixed cost revenue, so too does banking and credit services vary their fee revenue structure and sources for its various financial services and products.

It's very hard to make universal statements to how these are structured, but about the only thing I think I can say is that if you aren't paying fees, the commercial entity must be aiming to make revenue off of you being a customer in some way. Some savvy customers can get services with a net positive value for free, but the business at large scale is going to try to extract what value it can.

It's hard to give a universal statement on price structuring, but generally fees can help squeeze revenue out of sticky customers, customers who need your services, customers who do not provide enough net capital or volume-based revenue to cover your costs.

You can also use fees to explicitly target or select for particular users. For instance, in some money and credit markets or markets which offer various costly rewards you can sometimes split your customer base into good revenue sources and costly freeloaders. A fee structure can even help signal or self-select these costly customers out of a product or identify them for your other product lines.

> if you aren't paying fees, the commercial entity must be aiming to make revenue off of you being a customer in some way.

Yes, credit cards make money from merchant fees and banks make money from lending your money out.

As a financial services provider, you can make money in a couple of ways: net interest [1], loan interest (spread between your deposit interest and interest rates you price for credit products), fees, and interchange (skim off debit and credit card transactions). Which matrix of fees you elect to implement is a function of your customer persona(s), what they value, and sensitivity to those income levers.

How do you pay to operate your business without income? You need to pay for people, infra, and other costs of banking provided. The only model that works for that is postal banking or deposit accounts issued by the central bank, where your nation state offers banking as a utility in some fashion.

[1] https://www.kalzumeus.com/2019/6/26/how-brokerages-make-mone...

Interest on deposits includes IORB from the federal reserve, which is the safest investment for them, current > 4%

This is the answer. Running a bank is expensive, even if from the customer's perspective all the bank is doing is provide a website that shows them a number. But that number is probably the most important single number in their life.

Since people are resistant to paying monthly account fees, banks will have to hide the fees in ways that you won't immediately notice. In a way, customers are deceiving themselves. If they just paid the monthly fees, the cost of their bank account would be highly predictable.

> How do you pay to operate your business without income?

Easy - VC funding :P

SVB crying in the corner :’(

There are plenty of no annual fee credit cards. If you get a credit card with an annual fee, you should be smart enough to know whether the benefits they offer make the annual fee worthwhile.

My wife and I fly a lot as a hobby. We’ve been averaging over a dozen trips per year since mid 2021.

We pay $3400 in Annual fees between 9 cards. We get around $4900 worth of benefits between those cards between Clear credits, companion flight passes (buy one get one free), hotel credits and various other credits.

That’s not including Delta Platinum Medallion status that gives us free automatic seat upgrades and lounge access for free food and drinks while waiting at the airport.

Of course we also get points toward flights and hotels for spending on them.

I’ve never experienced my bank imposing such fees or restrictions, nor can I recall any bank I’ve used over the past two decades or so doing such. However, some banks adopt these practices, and I question why customers remain loyal when there are abundant alternatives in today’s competitive financial market.

One possible explanation is inertia: many people stick with their bank because it’s familiar. It may be the bank their parents used, or they’ve been loyal customers for years and assume they’re getting the best deal. Unfortunately, this loyalty often overlooks better opportunities elsewhere. Interestingly, credit unions—despite promoting themselves as customer-centric and fee-conscious—can also impose excessive fees, challenging their claimed superiority.

Credit unions are notorious for limited official working hours, which can be frustrating when urgent banking needs arise. Accessibility in banking has become a priority, especially for those who need customer service outside traditional “banker’s hours.” The idea of physically visiting a branch, often during inconvenient weekday hours, feels increasingly outdated in today’s digital-first world.

For me, a bank needs to be accessible on my schedule—not the other way around. The ability to resolve issues or access services anytime is essential, and plenty of financial institutions cater to these preferences without restrictive fees or antiquated processes. Customers should embrace this freedom of choice and find banks that value their time and priorities, not the other way around.

Automatic payments make banks sticky. Once you have your credit cards and utilities paid off with a particular account, you're probably not leaving.

I can't tell if this is a "link in bio" ad disguised as engagement bait. But, I've opened at least a hundred bank and credit card accounts over the last couple decades as part of "churning" community. Got tens of thousands of dollars in sign up bonuses and it sent my credit score to 830+. I started when I was broke, and kept doing it, since a couple scheduled 5 minute tasks for hundreds of dollars each time is still a fairly easy side hustle. So I could ask the opposite question — why are banks giving money away? Fees and rewards are carrots and sticks. Some use both at once, like high reward cards with annual fees. There are desirable customers and there are undesirable customers and they treat them accordingly. Since you say your customer base is specifically "luxury buyers" (meaning you can skim profit off them in a lot of ways), you probably avoid the stick entirely and treat them pretty well. If your customer base was the lower-income segment with bad credit scores, maybe you'd pivot to fee based relationships. If you're a huge bank, you probably have departments for each style.

lol dude or dudette! you clicked on the bio - I never said you should. I'll educate you, they make more money from low-level people than luxury status people or people with more money in their bank accounts. The rich benefit from the payments the average make on these accounts.

Particularly post GFC when net interest margins went through the floor, banks had to keep up revenue amid heightened capital requirements - they increased fees and cut back on employees. If you’re thinking the fees don’t matter relative to the overall, remember that banks are managed as divisions and someone running retail is responsible for their profit and loss statement.

A small income is better than no income at all, so why not charge $10/year if you can, and the customer won't mind?

I also suppose that charging a small amount regularly is a garbage collection mechanism. If you stopped paying attention to your empty account, it will run into negative, and eventually be closed due to that.

A little bit late to the party, but keep in mind that interest is a risk bound product, but fees are not. Fees are not pushing the capital requirements and generally better in terms of ROE. This is the main reason, I think.

Also, traditionally it was technically expensive to calculate a bunch of fees for every transaction and core banking systems have had quite complicated rules processing engines which were damn slow. Sometimes it was more feasible to skip a fee than take the burden. I'm not in the industry anymore but I suppose this has been changed and fees becoming the new driver.

Basically most of the Fintech was born on bank's inability to perform a lot of simple calculations and react to the market fast. The gap could be closing.

Nobody with good credit ratings is paying these fees. Exception maybe being those folks who want those fancy AMEX Black Card or whatever those cards are with concierges, etc.

And many of the best fancy cards provide enough value in the various benefits they offer to outweigh the fee for many of those customers. This is often true not only in terms of luxury experiences like lounge access, but even in terms of cold hard financial value. Examples include a certain amount of annual statement credit against certain types of transactions, points that can be directly or indirectly redeemed for lots of types of purchases, and so on.

For example, Amex Platinum comes with $400 Dell credit each year, and several other similar perks.

I have great credit and my bank charges me $3 every month to pay my rent. (They will send a cheque in the mail for free, but it wasn't reliable for me so I stopped doing that.) Third world stuff.

Doesn't sound normal unless the fee is being charged by the landlord and not the bank. (Landlords seem to love payment fees.)

It's the bank. One of the biggest US retail banks. Maybe other big ones don't, maybe I should change banks.

Wat

Yes it's for people who have not demonstrated that they can use credit responsibly, not overdraft their accounts, etc.

Yeah, like single moms and people who experience unexpected deaths or job losses. How irresponsible! Maybe if they were rich app developers like Hacker News, they wouldn't have to be punished so much.

Respect to you man. Not a lot of people care or have a lot of compassion for people that deserve it

In 2023, JP Morgan Chase collected $1.1 Billion in overdraft fees

https://www.consumerfinance.gov/data-research/research-repor...

I saw this and i thought it was wild but trust me from the inside that is just pennies. I promise.

Given a choice between having a billion dollars and not having a billion dollars, they're still going to choose to have a billion dollars.

I'm sure it's a lot more than it costs them to collect the fees.

Most banks dont charge for standard non-business accounts, neither for debit cards...where are you seeing these fees/charges?

I've seen these fees in personal accounts. They're usually waived if you maintain a certain minimum balance. Sometimes it's a few thousand dollars, but if you want things like free checks or other "perks" they can be much more. And of course they don't pay meaningful interest on your deposits. They're basically charging you the fee in the form of lost interest.

Just a PSA for anyone unaware, you can get checks printed anywhere and using a huge variety of designs. It is not mandatory to order them from the bank where the account is held.

Why would you expect checks to be free? The people who print checks need to eat too.

I'm curious what else is under your "perks" umbrella.

If you want a checking account with no minimums try Ally. EFT payments are also free. You will have to pay for checks however.

Because a small number of checks have been free for many decades. They cost almost nothing to print. But banks now charge $20 for a small box. Add another $10 for shipping.

I don't use checks often but have to buy a box in order to have >0.

I like Ally. I can do pretty much everything I need to for free and their interest rates are about as good as it gets. Only annoying thing is being unable to deposit cash but that's such a rare occurrence.

Most big banks in Canada charge for standard non-business bank accounts.

This one is TD but the others all charge the same. Why compete when you can collude?

    TD Unlimited Chequing Account
    
    Unlimited transactions for your peace of mind
    
    Annual fee rebate for the first year on select TD credit cards (up to $139)
    
    No TD ATM fee at any ATM in Canada
    
    Free Interac e-Transfer® transactions
    
    Monthly account fee of $16.95 or $0 if you maintain a daily balance of $4,000 or more

https://www.td.com/ca/en/personal-banking/products/bank-acco...

Also, $16.95/month is $203.40/year, which divided by $4,000 is 5.09%. If you can earn more than 5.09% then you are better off paying the fee and investing your $4,000 elsewhere.

It is also pretty much impossible to keep precisely $4,000 in your account because of the lumpiness of day-to-day inflows (paycheques) and outflows (bills). If you keep say $10,000 in your chequing account to (a) avoid the $16.95/fee, and (b) provide a buffer against unexpected expenses, then the breakeven return on your money is $203.40 / $10,000 = a paltry 2.03%.

Sure, you could pop it into a TD High Interest Savings Account and earn your high interest rate of 0.050%.

Wait, its 0.000% on $4,000

High interest, indeed!

Yes, and while TD is paying you 0.050%, they are loaning out your $4,000 in the form of a mortgage on which they earn 6.79%!

There are plenty of reputable banks that still pay 3-5%. Amex savings accounts are now 3.8%

Even for business accounts. I have a "business" account, opened for some contract work I did years ago, it has very little activity, but I pay no fees and have a debit card. I keep it open "just in case I need it" because it doesn't cost me anything.

In Germany it’s ubiquitous

In France (BoursoBank,Fortuneo, Hello bank!, Lydia) and in Switzerland (yuh), cards and bank services are free. And you can use you card to really pay instantaneously bills without making a bank credit monthly.

That's understandable as they already make money with your savings...

Because they can and are not losing significant number of customers to price competition. Same works on most things. And if they cannot add fees, they will add ads. Extract as much money as possible and when they finally start losing people step it back and give discounts for limited period.

They do make significant profits from them, especially from poorer people who incur them. They're also a great pretense to charge even more penalty fees, trapping people in a cycle of debt that is, conveniently, very profitable.

This is the same board where people will tell you to charge $10,000 a week for cloud consulting because it's "value-based pricing", and to steadily increase the per-user costs for your dime-a-dozen CRUD web app "because people will pay it". Amazing.

Banks do it because they can, buddy. It's wealth extraction, and if you aren't the one doing the extracting, you're the one being extracted.

Because you’re using the wrong bank.

I use Schwab for personal banking. They are excellent and return ATM free each month. Been using them for years and don’t think I’ve ever paid a fee.

Likewise for business banking I use Mercury and they’ve been great too.

Consider the thought process of executive management:

Do we want to make more money? Or less money?

Because they can.

I wish I still believed that massive companies charged for things because they need to, and not simply because they can.

It reminds me of freezing your credit (you know, the thing that makes it a lot harder to get your life ruined with identity theft (in the US)). This used to cost about $10, each time, and I believe you had to send a letter with a check to each credit bureau.

Now? It's free, and you can do it on-demand online (although they all try to upcharge you into buying their stupid credit score nonsense every single time, which should be illegal). It's curious how this used to cost money, and then a lot of scandals happened, and either laws were passed or threatened to be passed, and now something pro-consumer that should have always been free... is free. And Experian, Equifax, and TransUnion are still making craptons of money.

The astute reader might ask why they ever charged for this in the first place. It couldn't be that they needed to, because they aren't now, and the universe hasn't imploded. So the only explanation is that they did it because they could, because it locked up something people needed to do behind a paywall, and was profitable.

The false dichotomy between "need to" and "because they can" is at the root of a lot of sloppy economic thinking. It's true that businesses aren't trying to charge the bare minimum they need to survive, and that this sometimes lets them absorb the cost of providing service X for free with no hit to consumer welfare. (This can happen for both regulatory and non-regulatory reasons - furniture stores, for example, will often give you quite a bit of free employee time in hopes of catching a sale.)

It's not true that business costs are entirely fictional and consumer willingness to get hosed is the only input to their pricing models.

Do they? Where? In the US? I have multiple bank accounts in both UK and Poland and none of them charge for just having the account or a debit card associated with the account.

as they should. i find it boils down to - because they can. I'm not sure if this post may have repercussions but we'll see.

> especially when they don't seem to make significant profits from them.

Where do you get the idea they don't make significant profits from them?

Shitibank US account hasn't charged me in 25 years. Now they do. $15 a month.

May they go to hell.

cause they make way way way more money on card swipes. but that's enough sharing for today

Better ask why in other countries charges are much less, better applications, better service and much more services they provide.

Because the good times are over, the free money is gone, and it's back to business as usual.

I prefer to pay a decent fee so they make money for the service. As tech oligarchs have taught us if you are not the customer you are the product. I'd prefer to be a customer to my bank.

Banks are an odd business. You are basically guaranteed some income but the margins are slim and lots of regulations. Despite all the bad behavior they are probably one of if not the closest watched businesses by gov regulators.

The banks are holding your money and lending it out at a profit (fractional reserve banking). You should not feel obliged to pay fees on top of this.

You're arguing that banks should subsidize their payment department with the profits from their investment department when safe investments like treasuries no longer yield interest. Basically, asking that banks should take ever larger risks to subsidize your bank account, simultaneously risking your bank account in the process.

That's how you get an economy in which banks are too systematically important to fail and therefore must always be bailed out, no matter what.

I'm no friend of the banks. What you've said is true but also the wrong conclusion. A huge percent of "account" customers lose the bank money because they are poor and never leave much in the account. How are they supposed to remain a customer rather than a product? There are 100 answers for all of this I'm just bringing up that fractional reserve doesn't necessarily mean the bank doesn't need a fee ever. The entire system needs changed though.