In New Hampshire, residents pledge to "live free or die." Apparently, that even extends to online banking.
An eagle-eyed New Hampshirite named Dave recently took out his magnifying glass and spotted a new fee in the small print at his bank's Web site. Customers who want to send money from Citizens Bank to an account at other bank — say a brokerage account or a high-yielding Internet savings account like ING Direct — must now pay.
"Just $3 for outgoing transfers to other institutions," the notice says. It came as part of an announcement titled "New, improved Web site."
Dave, who requested anonymity, didn't see it that way.
"Apparently banks are now charging sneaky transfer fees," he said. "With people going to online banking, banks are starting to charge ATM type fees for transfers."
After complaining to the bank and getting an unsatisfactory response, Dave told his bank that he would live free or …
"I told them I would probably look for a new bank," the 45-year-old said.
Easier said than done, however. Dave's other bank, JP Morgan Chase, also charges the outgoing transfer fee. And in fact, many big banks now tell their online consumers they can't send their money to another bank without paying the $3 fee every time. Curiously, incoming transfers are free. In other words, the bank will gladly take your money, but it won't give it back without a fight.
Mike Jones, a spokesman for Rhode Island-based Citizens Bank, said the new fee actually represents a cost savings for consumers. Before August, Citizens account holders had to use wire transfers to send money to other institutions, which cost $18 to $35. The $3 fee is a bargain, he said.
"This is part of several enhancements to our online banking platform," he said. "We are doing it to increase convenience, and it comes with a cost savings for consumers."
The interest-rate chase
Bank-to-bank transfers have become common at a time when consumers are fighting for every quarter-point of savings interest they can earn. Checking account interest rates are at historic lows. Internet-based savings accounts offer slightly better rates and have attracted about $160 billion in deposits since they exploded onto the scene in the early part of this decade, according to the Tower Group, a financial research firm. Other consumers chase higher yields through money market funds offered by brokerage accounts or other banks. It all leads many customers to habitually move money around to capture that interest.
If that's you, watch out. A few transfer fees could wipe out that extra interest you think you're earning.
Many online banks, such as HSBC, waive outgoing transfer fees for their Internet accounts. But traditional checking accounts often come with the fee, a disincentive for moving money out of their accounts.
"It definitely seems unfair, but I'm not surprised. … This is another example of nickel-and-diming customers to death," said Kathleen Day, a spokeswoman for the Center for Responsible Lending. "Consumers account for $7 out of every $10 in this economy, and it is so unproductive that the financial community is sucking every spare penny from consumers for this non-productive enterprise. The irony is that this nickel-and-diming is hurting our chance of an economic recovery."
Greg McBride, an analyst for Bankrate.com, said that consumers should get used to these kinds of fees.
"This is the banks' equivalent of sticking their tongue out at the customer when they take their money out," he said. While consumers get used to the idea that they can improve their returns with just a few clicks of a mouse, banks will continue to devise disincentives to stop them.
"There's more where that came from."
RED TAPE WRESTLING TIPS
Consumers can generally avoid this outgoing transfer fee. Because banks accept incoming transfers free, account holders should always have the destination bank initiate the transfer. In other words, if Dave wanted to move money from his Citizens account to an ING Direct account, he should initiate the transfer from his ING account — telling ING to "pull" the money in, rather than telling Citizen to "push" the money out. At least for the moment, "pulled" transfers remain free.