Banks increasingly rely on fees to fatten bottom line

News that Bank of America is jacking up its ATM fee in some locations for non-customers to $3 from $2 prompted the usual muttering about money-grubbing financial institutions that nickel-and-dime people to death.

But BofA's decision isn't the real story. It's the fact that virtually all banks increasingly rely on a wide variety of fees to boost their bottom line, and the trend shows no sign of abating.

According to the Federal Deposit Insurance Corp., about 42 percent of banks' annual revenue last year came from non-interest income, which is dominated by money from fees. That's up from about 34 percent a decade ago.

Andrew Gray, an FDIC spokesman, said this highlighted "the industry's increasing reliance on fee-based sources of income."

Some people shrug off bank fees as a fact of life.

"Banks are in business like anyone else," said Brian Porter, 54. "Their job is to make money, and the place where you make money is fees."

Don't blame the banks, he added. Blame shareholders.

"Banks are under tremendous pressure to generate fee income," Porter said.

The 50 percent increase in BofA's non-customer ATM fee obviously won't sit well with anyone who needs some ready cash by turning to one of the bank's more than 16,000 machines, the largest ATM network in the country.

"It doesn't cost the banks that much," said a disgusted David Kavanagh, 45, who was visiting Southern California from Ireland recently. "It should be free."

The American Bankers Association estimates that, as of last year, about 395,000 ATMs were in use nationwide, handling 10.1 billion transactions.

BofA by far had the largest number of machines, followed by Cardtronics (10,000), JPMorgan Chase (7,310), U.S. Bancorp (7,164) and Wells Fargo (6,200).

BofA argues that the fee hike benefits its customers by providing an incentive for non-customers to take their ATM needs elsewhere.

"If you are a customer of Bank of America, you will have greater access to our network of ATMs," said Diane Wagner, a spokeswoman for the bank. "This may also encourage non-customers to become customers so they can avoid the fee."

Some might say that BofA is solving a problem that doesn't exist. When was the last time you saw a line stretching around the block at an ATM?

Some might even wonder if this is just a ploy to bring in more revenue from people who may not have a choice about where they get their cash.

"That would be a very cynical way of looking at it," Wagner said.

Some observers agreed.

"If people don't like paying the fees, use your own bank," said Lorrick Simon, 38, a financial-services worker and BofA customer. "This is a free society. If you don't like the fees, vote with your dollars."

Easier said than done, considering that just about all banks slap fees onto even the most picayune transactions. If you print out the online list of BofA's fees for its various accounts, for example, you get a document 11 pages long.

Fees vary depending on your bank and account. Some of the more eye-opening charges:

-- BofA charges $3 to return your canceled checks with your monthly statement.

-- The bank charges nothing for you to speak by phone with a checking-account service rep six times a month. After that, it's $1 per call in many cases. Your seventh call to BofA's automated phone service, and all subsequent such calls in a given month, can run 50 cents.

-- Wells Fargo may charge $2 if you speak with a service rep by phone "when your request could have been handled by our automated service."

-- Wells charges some customers a $1 monthly "point-of-sale purchase fee" to use their debit cards.

-- Citibank charges some customers $5 to draft a money order. Non-customers are charged $10.

-- If you want to stop payment on a check, Citibank may charge $30.

"The only requirement for banks is that they disclose their fees," said Ed Mierzwinski, consumer program director for the U.S. Public Interest Research Group. "Otherwise, neither Congress nor the regulators believe in capping fees."

Tara Terry, a 45-year-old legal secretary, said her absolute least-favorite fee was her bank's overdraft fee.

"I got hit with a fee for $20 just because my payroll deposit hadn't arrived until a few minutes after I made a payment for something else that same day," she said.

In fact, the non-profit Center for Responsible Lending said in a recent report that banks were charging customers a total $17.5 billion a year in overdraft fees, up 70 percent from 2004.

The system is so out of whack, according to the center's report, that the overdraft fees are larger than the $15.8 billion that consumers were overdrawing.

"It's ridiculous," Terry said. "It's highway robbery."

David Lazarus is a columnist for the Los Angeles Times, a Tribune Co. newspaper.