Big banks, not content with the profits they’re raking in, are upping the ante. They’re now applying more and more fees to various accounts, but while it might hurt your balance, bank ETFs may love it.
Checking account services at many major banks used to be free, but this is not the case anymore. New fees are being applied at the biggest banks such as Bank of America (BAC) and JPMorgan Chase (JPM) to test just how much customers are willing to pay for banking services.
Robin Sidel at The Wall Street Journal reports that the new fees include monthly charges for debit cards, online-banking charges and more. And they’re not likely to stop there.
Banks are rushing to make thousands of dollars from customers as new Federal restrictions are set on debit cards. The Federal Reserve proposed capping the amount banks can charge merchants for debit transactions at seven to 12 cents, from an average rate of 44 cents.
Many customers may vote with their feet, but for now, funds with a huge allocation to these big banks could see performance goosed as profits from fees roll in. Financial Select Sector SPDR (XLF) is one such fund; name a big bank, and it’s likely a top holding. Chase (CCF) is 9.5% and Bank of America is 7.5%. iShares Dow Jones U.S. Financial Services (IYG) has an even bigger weighting to Chase, with 12.3% and Bank of America accounting for 9.6%.
Tisha Guerrero contributed to this article.