Bid for a California Banking Giant : New Stagecoach Route : Q & A : What Would a Merger Mean to Customers?
While shareholders were celebrating the proposed hostile takeover of First Interstate Bancorp by Wells Fargo & Co., some bank customers were wondering whether they would be hurt.
The proposed merger of California’s second- and third-largest banks is only the latest in a series of consolidations that have left customers with fewer choices, fewer branches and, often, higher fees, said Stephen Brobeck, executive director of the Consumer Federation of America in Washington.
Indeed, some customers of both banks expressed concerns about the service they would receive if a merger takes place. Some said they expect longer lines and a less customer-friendly atmosphere.
“I’m not happy about it. . . . I feel like we’re losing our choices,” said Gloria Carroll, 40, who banks with Wells Fargo.
However, a Wells Fargo spokeswoman said it’s too early to say whether there would be changes to rates and fees if the deal went through. Many banking officials say consumer worries about decreased competition and rising costs are overblown.
Some analysts and officials suggested competition could increase--and fees and charges drop--as banks and thrifts fight for Wells Fargo and First Interstate customers. Also, cost savings from a deal could give Wells Fargo room to cut fees, some analysts suggested.
Here are answers to some questions on how the proposed merger might affect customers:
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Q: I’m a First Interstate customer. Is my branch going to close if the merger goes through?
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A: Wells Fargo executives said Wednesday that there would be some branch consolidations, but they were not ready to provide details.
Wells Fargo does have a history of liberally closing branch offices when it takes over banks. When it purchased Crocker National Bank in 1986, it shuttered 116 branches--about one in six--within a year. The company took over a series of smaller and mid-sized banks in the five years following the Crocker merger. These banks had about 230 branch offices between them. However, Wells today boasts only 549 traditional bank branches--just 36 more than it had in 1986.
However, Wells Fargo has become the leader in starting mini-banking centers in supermarkets across California. The San Francisco-based company now has 312 such offices, which provide access to automated teller machines and several loan services. So while you may not have a traditional branch office nearby, you’re likely to have access to an automated teller and at least several loan services.
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Q: What about fees? Would I have to pay more?
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A: Usually after a merger, all accounts are left alone for a few months. After that, customers are required to shift their existing accounts into accounts provided by the surviving institution, said Stephen Brobeck, executive director of the Consumer Federation of America. Often that means customers pay a bit more, because bigger banks often charge more than smaller banks.
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Q: What about in this case? How do Wells Fargo’s checking accounts compare to First Interstate’s?
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A: Wells Fargo’s least expensive checking program is called ATM checking. For $6 a month, it allows unlimited check writing and access to ATMs. But if you need to see a live teller during the month, you get zinged with a $5 penalty charge. You can reduce the regular monthly service charge by $1 if your checks are directly deposited and by another $1.50 if you don’t have your canceled checks returned.
First Interstate offers a free checking account to customers 55 and older. Everyone else pays $4.50 for basic checking--which allows unlimited access to tellers and ATMs, but only allows you to write eight checks a month. You get hit with a $1 fee for each check you write over the limit.
Both institutions offer less restrictive checking programs, which are free to those who maintain minimum daily balances of $750 or more.
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Q: I have a savings account. How do the savings programs compare?
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A: Regular savings accounts are free at either bank if you maintain a minimum daily balance of at least $300. If your balance drops below that mark, you’ll pay $7 a quarter--$28 a year--at First Interstate. You’d pay $3 a month--$36 annually--at Wells Fargo.
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Q: What about credit cards? Would rates and fees change?
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A: That’s also anyone’s guess. Wells Fargo’s standard credit card charges 19.8% annual interest plus an $18 annual fee. First Interstate’s basic card offers a variable rate (currently at 17.9%) and charges a $20 annual fee.
Wells Fargo also offers variable-rate cards to those with an established credit history. The interest charge is currently 18.5%.
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Q: Would the rates paid for deposits change?
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A: These rates change frequently because of changes in market interest rates. However, big banks tend to be slower to raise deposit interest rates when rates are rising, and they’re slower to cut rates on loans when interest rates fall, said Martin Bradshaw, president of Bradshaw Financial Network, a rate research and publishing firm.
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Q: What are my options if the merger goes through and fees charged for basic banking services rise? Is there anyplace to go to get lower-cost banking services?
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A: “If a person is looking for the lowest fees and highest rates, they should look first at a credit union,” said consumer advocate Brobeck. Only about half of all households qualify for credit union membership because of membership restrictions, he added. But those who do qualify can often obtain banking services at far less cost.
Times staff writer Ealena Callender contributed to this report.
