Mergers 'Simplify' Banking, but at a Hefty Price

What do bank mergers cost consumers? Ten dollars a month, says Kendis Rochlen Moss.

A Bank of America customer for more than 20 years, she recently was notified that the bank was "simplifying" its checking accounts in the wake of its merger with Security Pacific. Buried in the announcement are a myriad of new fees and minimum balances that are likely to boost the cost of Moss' interest checking account from nothing to $10.

Moss links the change to the merger, although the bank denies the two are related.

"I don't know what this is doing to their employees, but I can tell you that a lot of customers are getting fired in this merger," she said. "What really irks me is they didn't even give me a month to get my tail out of there and go see what another bank could do for me."

Harvey Radin, a bank spokesman, said the higher fees were planned before the merger took effect. The bank waited until the deal was complete so it could change accounts from both banks at the same time, he said.

It's hard to say who's right.

"We have said all along that bank mergers cause an increase in prices," said Peggy Miller, banking director at the Consumer Federation of America in Washington.

The group has studied a number of East Coast mergers and found that fees almost always rise when banks combine, she said.

Harvard Prof. Dwight Crane, who co-authored a study of 50 recent New England bank mergers, said there is "some evidence" that prices rise following a merger. But he said bank fees are likely to climb regardless.

"There are fundamental structural changes in banking that are driving the changes in fees," Crane said.

Banks now pay interest on more types of accounts, which raises their costs, so banks can no longer afford to offer free or money-losing services, he said.

Whatever the reason, bank mergers are increasing like rabbits, and so are fees. To consumers who must pay the higher costs, it may not matter whether the two are related.

In fact, nearly every major U.S. bank--including Wells Fargo, Citicorp and Chase Manhattan--has raised fees in recent years, sometimes more than once. Bankers say they are simply passing on the rising cost of doing business.

The changes at Bank of America and Security Pacific only serve to underscore the point, and they affect an awful lot of customers. Bank of America estimates that half the households in California have some relationship with it, either through checking or savings accounts, credit cards or loans.

No-fee checking accounts available to older people are being phased out at both banks. Bank of America's "Service 62" and Security Pacific's "55 Account" are both now closed to new customers.

For the rest of its customers, Bank of America is eliminating per-check charges, but drastically increasing fees and minimum balance requirements, especially on lower-cost accounts.

The monthly fee on the bank's standard checking account jumps to $7.50 from $3 in August. In the past, customers who kept more than $500 on deposit could get the fee waived. Now they'll have to keep minimum daily balances of $750 or more. Anyone who doesn't keep the minimum balance and who wants to get their canceled checks back will have to pay $1 more per month. (The $1 canceled-check charge applies to most accounts.)

Monthly fees on the bank's Alpha account climbed to $8 from $7. The minimum balance needed to avoid that fee jumped to $1,500 from $1,000.

Monthly charges for the bank's interest checking account rose to $9 from $8 for those who don't keep a minimum balance of $1,500 or combined balances of $4,000. Previously the minimum balance requirement was $1,000.

Bank of America's $5 monthly NOW account is being phased out. Customers are urged to switch to the $9 interest checking account. (NOW means Negotiated Order of Withdrawal; it became the popular name for nearly any kind of interest-bearing checking account during the early 1980s.)

Finally, those who have Bank of America's Prima account, which provides them with free checks, a safe deposit box, free traveler's checks and money orders, will now have to keep $25,000 on deposit versus $10,000 if they want the bank to waive the $20 monthly account fee. Roughly 20% of Security Pacific's customers are expected to face higher fees as a result of the merger and account changes, while 13% could pay less, a bank spokesman said.

The only low-cost accounts that will survive the merger are those providing bare-bones services. Limited checking and Versatel checking--which cost $3.50 and $5 a month respectively--are designed to keep consumers out of bank branches and let them use automated teller machines. Those who need to see a human teller too often will get dinged with extra charges of up to $4.50 monthly.

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