Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Ask HN: Why are banks charging so many fees for accounts and cards?

news.ycombinator.com

Post reply on HN
Print view View original

51–60 of 82 posts

Re: Ask HN: Why are banks charging so many fees for accounts and cards?

#51

Post by dackle »

doubled112 wrote: post #49
dackle wrote: post #48

Earlier quoted context omitted.

Also, $16.95/month is $203.40/year, which divided by $4,000 is 5.09%. If you can earn more than 5.09% then you are better off paying the fee and investing your $4,000 elsewhere. It is also pretty much impossible to keep precisely $4,000 in your account because of the lumpiness of day-to-day inflows (paycheques) and outflows (bills). If you keep say $10,000 in your chequing account to (a) avoid the $16.95/fee, and (b)…

Sure, you could pop it into a TD High Interest Savings Account and earn your high interest rate of 0.050%. Wait, its 0.000% on $4,000 High interest, indeed!

Yes, and while TD is paying you 0.050%, they are loaning out your $4,000 in the form of a mortgage on which they earn 6.79%!

Re: Ask HN: Why are banks charging so many fees for accounts and cards?

#52

Post by jbs789 »

Particularly post GFC when net interest margins went through the floor, banks had to keep up revenue amid heightened capital requirements - they increased fees and cut back on employees. If you’re thinking the fees don’t matter relative to the overall, remember that banks are managed as divisions and someone running retail is responsible for their profit and loss statement.

Re: Ask HN: Why are banks charging so many fees for accounts and cards?

#53

Post by kdmtctl »

A little bit late to the party, but keep in mind that interest is a risk bound product, but fees are not. Fees are not pushing the capital requirements and generally better in terms of ROE. This is the main reason, I think.

Also, traditionally it was technically expensive to calculate a bunch of fees for every transaction and core banking systems have had quite complicated rules processing engines which were damn slow. Sometimes it was more feasible to skip a fee than take the burden. I'm not in the industry anymore but I suppose this has been changed and fees becoming the new driver.

Basically most of the Fintech was born on bank's inability to perform a lot of simple calculations and react to the market fast. The gap could be closing.

Re: Ask HN: Why are banks charging so many fees for accounts and cards?

#54

Post by scarface_74 »

There are plenty of no annual fee credit cards. If you get a credit card with an annual fee, you should be smart enough to know whether the benefits they offer make the annual fee worthwhile.

My wife and I fly a lot as a hobby. We’ve been averaging over a dozen trips per year since mid 2021.

We pay $3400 in Annual fees between 9 cards. We get around $4900 worth of benefits between those cards between Clear credits, companion flight passes (buy one get one free), hotel credits and various other credits.

That’s not including Delta Platinum Medallion status that gives us free automatic seat upgrades and lounge access for free food and drinks while waiting at the airport.

Of course we also get points toward flights and hotels for spending on them.

Re: Ask HN: Why are banks charging so many fees for accounts and cards?

#57

Post by scarface_74 »

mitchellst wrote: post #27

I don’t know that there’s a single answer, but the replies here are in the neighborhood. Fees of some kind are the only revenue model, so you pick the ones that work for your use case. Two other thoughts, one speculative/general and one where I know of what I speak: If you make most of your income off a small group of your customers, then it’s wise the charge some nominal fee on the other customers to get them to bre…

If you know what you are doing, the credits that you get for doing things you already do should offset the annual fee even if you don’t use the card. Wander over to r/creditcards.

We have five Delta cards between my wife and myself that we only make one charge a year on for the hotel credits. Just by having the card, we get a buy one get one free plane ticket good for anywhere in the US, Mexico, Central America or the Caribbean. That more than pays the annual fee.

We have over a dozen trips planned this year and we took over a dozen each year since mid 2021. It’s a hint of ours.

Re: Ask HN: Why are banks charging so many fees for accounts and cards?

#58

Post by scarface_74 »

doubled112 wrote: post #49
dackle wrote: post #48

Earlier quoted context omitted.

Also, $16.95/month is $203.40/year, which divided by $4,000 is 5.09%. If you can earn more than 5.09% then you are better off paying the fee and investing your $4,000 elsewhere. It is also pretty much impossible to keep precisely $4,000 in your account because of the lumpiness of day-to-day inflows (paycheques) and outflows (bills). If you keep say $10,000 in your chequing account to (a) avoid the $16.95/fee, and (b)…

Sure, you could pop it into a TD High Interest Savings Account and earn your high interest rate of 0.050%. Wait, its 0.000% on $4,000 High interest, indeed!

There are plenty of reputable banks that still pay 3-5%. Amex savings accounts are now 3.8%

Re: Ask HN: Why are banks charging so many fees for accounts and cards?

#60

Post by krapp »

Lopsii wrote: post #56
x13 wrote: post #55

In 2023, JP Morgan Chase collected $1.1 Billion in overdraft fees https://www.consumerfinance.gov/data-research/research-repor...

I saw this and i thought it was wild but trust me from the inside that is just pennies. I promise.

Given a choice between having a billion dollars and not having a billion dollars, they're still going to choose to have a billion dollars.
Post reply on HN