(for the other 95% of America)

Friday, February 4, 2011

Banks Phase Out Free Checking in Response to Financial Reforms

The era of free checking accounts is officially over, may they rest in peace. Originally started by Washington Mutual in the mid-1990’s and later adopted by major banks in the early 2000’s, banks are now preparing to phase that out, and start charge customers roughly $100 dollars every year in monthly installments to maintain a checking account -- if you don’t regularly have anywhere from $500 to a few thousand dollars, depending on who you bank with.

Claiming that new financial regulations regarding the use of ‘hidden fees’ (credit card payment and overdraft fees) will cost them billions of dollars a year, the new checking account fees will partly make up for the loss. Basically, it is another way banks have managed to put even more strain on their least-profitable customers – the poor, even in the face of growing public scrutiny. But, alas, gone are the days when banks can rake in hundreds of billions of dollars a year by essentially praying on and exploiting the weakest members of our society. Critics called the fees ‘hidden’ because the most successful firms that put these fees into place were the ones that most successfully hide the extra fees from consumers.

The bigger story here is this: a company makes profit by producing a product that will somehow make peoples lives better, and, ipso facto, people will buy the product. GE produces appliances, Apple produces computers, and Tropicana produces juice; people need these things, and they buy them. Right?

But a hidden fee is not a product. Nobody is rushing to the stores because they just really need some hidden fees. There were no ‘innovative’ ideas that would make people’s lives easier or more efficient. It’s just a way banking executives can line their pockets with fat bonuses. The worst part is that the fees predominantly hurt the most vulnerable members of our society, many of which have already stopped using banks altogether, and have resorted to using check cashing stores – which in many ways are even more predatory towards the poor.

The bottom line is that commercial banking should be boring, as Joseph Stiglitz put it. If you want to make multi-million dollar bonuses than you should work for an investment firm or a hedge fund. Or, try this: actually come up with a good idea! The success of any sector should be decided by the benefits to our society. Money, instead of being a means to an end, has become an end in itself.

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