Small Banks Cautiously Ramp Up Fees

November 7, 2013
Wall Street Journal 

Small lenders seeking ways to soften the blow from a combination of low interest rates, lackluster loan growth, and growing regulatory costs have been raising some "avoidable fees" on services such as stop-payment orders, bounced checks, wire transfers, and money orders. U.S. banks of all sizes raked in $8.39 billion in fees on deposit accounts in the 2013 second quarter, compared to $8.21 billion in the previous three months; while fee revenue at credit unions also rose, climbing to $1.87 billion from $1.79 billion over the same time span.

While large banks can push into more profitable ventures, small lenders offer fewer products and services that can offset low profits in their core business, analysts say, and therefore must make careful choices about fee increases so as not to drive away loyal customers. "There's nothing like raising fees to get the ire of customers up," warns Hank Israel of the banking industry consultant Novantas Inc. However, he adds, consumers better tolerate fees that they do not have to pay on a regular basis -- as opposed to a monthly fee on their checking account.

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