Wells Fargo makes it harder for poor customers to avoid checking account service fee

Starting in October, many of Wells Fargo’s over 24 million checking account holders will have one less option to avoid the bank’s $10 monthly service fee.

The bank will no longer waive the fee on its popular “Everyday Checking” account if the customer uses their debit card 10 times in a month, according to a message sent to customers. Instead, most account holders will now have to maintain an average daily balance of $500 to avoid the fee, a reduction from an earlier threshold of $1,500.

The fee is also waived for customers age 17 to 24, for those associated with a college campus and if the account has $500 or more in total qualifying direct deposits in a month.

Wells Fargo charged $4.8 billion in service fees across all deposit accounts last year, a figure which includes overdraft fees, making up about 6% of the bank’s annual revenue.

Wells Fargo spokesman Jim Seitz said that change was made, in part, because customers and bankers told the bank that the debit-card transaction count was “challenging to understand.”

While a lower required balance limit is good for some consumers, the net effect of the change will be for more of the cost of checking accounts — a free product for most customers — to be financed by the poorest customers, according to Rochelle Sparko, director of North Carolina policy at the Center for Responsible Lending. Those who will pay the service fee will also likely be the ones to pay overdraft fees as well.

“People are not in a position to pay these excessive fees right now,” Sparko said. The pandemic has left millions unemployed or without regular work, and the changes could have an adverse impact on the poorest customers.

“It is just a terrible time to be pushing their fee structure to be more reliant on overdraft fees,” she said. Wells Fargo charges $35 per overdraft.

Overdraft-free account

The move comes after Wells Fargo created a new bank account with no overdraft fees, which launched Sept. 1.

That product is designed for young people, as well as to help people integrate into the financial system, according to the bank. Seitz said that customers may want to look at that account option to see if it meets their needs better. It has limited features, as well as a $5 monthly fee.

The move to create a no-overdraft account fits with Wells Fargo’s push to regain consumers trust after its fake-accounts scandal, in which hundreds of thousands of Wells Fargo workers took part in opening millions of sham accounts in customers’ names, among other misconduct.

But the fee changes scheduled for October may undo some of the goodwill the bank sought from the overdraft-free account.

“Generally, lower balance limits are good, and have the potential to bring more people into the banking system,” said Carter Dougherty, spokesman for Americans for Financial Reform, a nonprofit that advocates for the stricter regulation of Wall Street. “But if Wells Fargo is taking away with the other hand by setting people up to pay more fees, it may have accomplished nothing.

“Big banks, and in particular Wells, do not exactly have a sterling track record on consumer checking accounts,” Dougherty said.

While the average U.S. checking account has about $3,000 in it, about one in four families don’t have $400 in liquid savings, according to research from the Federal Reserve.

Wells Fargo, as well as other banks, have been criticized for concentrating fees on its poorest customers, while sparing its wealthier ones. Bank of America’s standard checking account charges a $14 monthly fee, unless the customer has a minimum daily balance of at least $1,500.

This story was originally published September 17, 2020 at 6:15 AM.