> The deregulation of the banking system in the 1980s heightened competition among banks. Many responded by raising fees and requiring customers to carry minimum balances. In 1977, over a third of banks offered accounts with no service charge. By the early 1990s, only 5 percent did. I would think that increased competition would improve conditions for customers?
First thought is that bank’s make their money from loans. As such the primary way they attract their actual customers is to keep interest rates as low as possible. Second thought is that the reason they want people to store their money with them is so they have more money to loan out. This means that the class of people who store little money with them, especially the people who are constantly near zero, are essentially using the services without providing a benefit to the bank in return. As such, increasing fees on those people would allow the bank to turn more profit without negatively affecting their actual business, or maybe even let them have slightly lower interest rates than their competitors due to a secondary income stream.
Or TLDR: People who don’t store much money in their bank account aren’t customers the bank wants if we ignore fees.