Bigger Banks Mean Bigger Fees

Published March, 29, 2001

Reinforcing the need for limits on corporations’ size in order to maintain competition, the Federal Reserve again has documented that large banks (assets over $1 billion) charged significantly higher fees to customers than small banks (assets under $100 million), and that fees at multi-state bank chains exceeded those of single-state banks.

The report, “Retail Fees of Depository Institutions, 1994-99,” highlights findings from the Fed’s annual survey of bank fees. Congress has required the surveys since 1989, and since 1996 the data has been separated by bank size and whether it was a single-or multi-state institution.

Among the report’s findings for 1999 data: the average monthly fee for a non-interest checking account with a minimum balance was $5.62 at small banks, compared to $8.20 at large banks. Stop-payment orders averaged $13.92 at small banks and $21.50 at large banks. The required minimum balances were substantially higher at large banks than small ones. Large banks also imposed higher and more frequent ATM surcharges. The report also found higher rates at multi-state banks compared to single-state operations.

Why, then, do large banks continue to gain market share? Largely through control of ATMs. In many areas, a handful of large banks control most of the ATMs, and the easiest way to avoid surcharges is to open an account with one of the dominant banks. This creates a perverted form of price competition whereby large banks may gain market share by raising ATM access fees–another example of the vast difference between a market economy and US-style corporate capitalism.

Unfortunately this important information has seen little exposure in corporate or independent media. 2001 may be the last year of the Federal Reserve’s annual report unless Congress enacts an extension or permanent status for these reports. As the only source of data on the consumer impact of banking consolidation and deregulation (and information that would be virtually impossible for any non-governmental organization to compile) these reports should be continued.

This article was based on a report by New Rules Project.

Related News: Independent Pharmacies Beat Chains on Price in New York Study

In December, 2002 prescription price survey conducted by the New York Statewide Senior Action Council in Albany, New York, concluded, “The lowest prices for generic drugs were found at an independent pharmacy. . . contrary to the belief that chain drug stores with high volume purchases would pass on the savings to customers.”

For example, prices for Lovastatin, a cholesterol medication, ranged from $84.50 at the independent Lincoln Pharmacy to $199.97 at Rite Aid. The online pharmacy Drugstore.com offered Lovastatin it for $99.99, Wal-Mart for $136.62, and Target for $146.39.

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