Seeking Alpha

Bank of America's latest effort to raise revenue from basic checking

  • It's latest effort to try and wring revenue from its most basic banking product (and a loss leader), Bank of America (BAC +0.9%) today begins offering "Safe Balance" - a checkless account for customers with low balances for a monthly fee of $4.95. The account won't allow overdrafts, so it could make sense for those depositors whose balances sometimes fall to zero, causing them to get stuck with overdraft fees.
  • This effort looks to be a little more well-prepared than previous efforts in 2011 and 2012 which drew swift regulatory and customer blowback and were quickly withdrawn. "We've been doing a lot of listening to customers, doing a lot of meetings with regulators and [consumer] advocates," says BofA's Andrew Plepler. "Predictability, safety, no surprises, no hidden fees is a recurring theme."
  • The stock hit a 4-year high earlier in the session, before pulling back a bit.
Comments (18)
  • bbro
    , contributor
    Comments (9322) | Send Message
     
    Horrors...trying to make a profit...
    6 Mar, 12:11 PM Reply Like
  • SoCalNative
    , contributor
    Comments (429) | Send Message
     
    That's the thing... People expect free checking. I don't think $4.95 per month is too much to ask. Compared to a $25 overdraft fee it's a smokin' deal!

     

    disc: very small BAC long position
    6 Mar, 12:26 PM Reply Like
  • th3decider
    , contributor
    Comments (281) | Send Message
     
    "Free checking" is not really free. It comes at the cost of the banks taking on way more risk with depositors money than they can handle, and counting on a gov bailout when things go wrong or else risk going insolvent. Free bank services are in essence paid for though tax dollars.
    6 Mar, 12:36 PM Reply Like
  • JD in NJ
    , contributor
    Comments (807) | Send Message
     
    It's like guaranteeing the bank that they'll get to charge you 2.4 overdraft fees a year.
    6 Mar, 12:42 PM Reply Like
  • DeepValueLover
    , contributor
    Comments (8153) | Send Message
     
    Charging people money for the delivery of products and/or services?!?!

     

    Send Moynihan go Guantanamo!!
    6 Mar, 01:36 PM Reply Like
  • Quoth the Raven
    , contributor
    Comments (2070) | Send Message
     
    I'm long BAC but would never pay $4.95/month for checking.
    6 Mar, 12:27 PM Reply Like
  • Jayyyyyy
    , contributor
    Comments (37) | Send Message
     
    Exactly. Free checking accounts are everywhere. I don't get it lol.
    6 Mar, 01:20 PM Reply Like
  • JD in NJ
    , contributor
    Comments (807) | Send Message
     
    I don't get it. The original article (of which I can see only a bit) says both 'checking' and 'checkless'.

     

    Not that it matters anyway, it doesn't sound much like anything I'd consider changing banks to get.
    6 Mar, 12:29 PM Reply Like
  • MattZN2
    , contributor
    Comments (676) | Send Message
     
    It actually seems reasonable. Keep in mind that it's designed for people with very low balances... essentially the 'unbanked'. No checks, no other fees (presumably). Probably no interest at all but regular accounts don't get any either so that isn't really an issue. But presumably a person can get a debit card with it. A bare-bones account.

     

    This type of account caters to a relatively large but generally unprofitable segment of society. It obviously isn't designed for people who have real cash flow and the discipline to maintain the relatively small balances required to avoid fees in a regular account.

     

    -Matt
    6 Mar, 01:26 PM Reply Like
  • JD in NJ
    , contributor
    Comments (807) | Send Message
     
    I'm trying to figure out what stratum of society would benefit more from this account than from a Capital One 360 (used to be ING Direct) account.
    6 Mar, 01:29 PM Reply Like
  • MattZN2
    , contributor
    Comments (676) | Send Message
     
    Anyone operating in a cash economy. As in actual cash, not checks or D.D. These people need three things: ATM access with no fees, an actual branch they can walk into to make a cash deposit, and a debit card. Quite a few people exist in this category.

     

    -Matt
    6 Mar, 04:17 PM Reply Like
  • JD in NJ
    , contributor
    Comments (807) | Send Message
     
    I cannot gainsay this, because I do not know if cash can be deposited in the fee free ATMs they offer. I've never had cause to try.
    6 Mar, 04:48 PM Reply Like
  • Buckoux
    , contributor
    Comments (5844) | Send Message
     
    "...essentially the 'unbanked'."

     

    Exactly. Most BofA's ATM's accept and dispense cash. This is banking at the bare minimum and the original BofA's in California had many accounts like this before the age of mega-banks. It's basic economical banking for the poor or the uncomplicated customer. And it's good PR for the bank. I approve. Long BAC.
    6 Mar, 07:25 PM Reply Like
  • Breezy Breeze
    , contributor
    Comments (38) | Send Message
     
    I couldn't have said it any better Matt. A bare-bones account indeed.
    6 Mar, 08:56 PM Reply Like
  • JohnJMoyer
    , contributor
    Comments (18) | Send Message
     
    This account is suited for people that generally gear towards prepaid debit cards...those cards charge you to reload each time and usually have many other fees attached to them..it is not for people with cash or that have direct deposit from their paychecks...BOA has a separate account for those people...My Access checking, which is Free for people who have direct deposit...

     

    It seems to me that BOA is doing a great service to the under-banked by offering this account and it will not allow over drafts, which is a common theme for people just living on the edge to make their monthly bills...it allows you to use their huge atm network...allows you to use a teller...deposit cash and or checks into their atms and in their many branches...

     

    Think about all those reloadable cards like bluebird from Amex and GoNow and the whole Green Dot network that is charging way more than the flat fee of what BOA is charging...also..getting these folks into the branches helps to meet other needs they may have, such as secured credit cards and retirement planning with a Merrill Edge account....It sounds like a great deal!!!
    6 Mar, 09:03 PM Reply Like
  • Moon Kil Woong
    , contributor
    Comments (11015) | Send Message
     
    I guess BofA can't get enough zirpish cash. I'd hate to look under the hood to see what's eating them to try to up their deposits. WE are liable to see a bit of the horror show when they beg for taxpayer money for the 3rd time.
    7 Mar, 01:20 AM Reply Like
  • DeepValueLover
    , contributor
    Comments (8153) | Send Message
     
    Moon,

     

    Are you saying that BAC is having capital issues and they are trying to keep shareholders from finding out?
    12 Mar, 06:43 PM Reply Like
  • JohnJMoyer
    , contributor
    Comments (18) | Send Message
     
    Think about it...$4.95 coming in every month from so many customers...possibly millions...with no risk of losses due to overdrafts...and no interest paid on all of those cash balances...with the possibility to expand some of those relationships to other areas of the bank, such as Merrill Lynch and FIA, and Mortgage...and from the customer's view point...a predictable monthly fee with no other surprises to worry about...bank with a teller or online or by phone...this is a sure win/win for the customer and the bank...and all of us who are long BAC!!! In my opinion, this should only help the bottom line...
    9 Mar, 10:19 AM Reply Like
DJIA (DIA) S&P 500 (SPY)
ETF Tools
Find the right ETFs for your portfolio:
Seeking Alpha's new ETF Hub
ETF Investment Guide:
Table of Contents | One Page Summary
Read about different ETF Asset Classes:
ETF Selector

Next headline on your portfolio:

|