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

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

#1

Post by Lopsii »

I'm trying to understand why banks still charge account fees and card fees, especially when they don't seem to make significant profits from them.

I started a fintech company focused on banking for luxury deals and worked with banking partners, so I've seen a lot of the industry from the inside. Still, I can't wrap my head around this.

Why are these fees still prevalent? Are they just a relic of legacy banking systems, or is there more to it? The scary thing is banks don't even make alot of money on that. So why still charge them.

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

#3

Post by elmerfud »

My bank doesn't do this and I can't recall any bank that I've banked with for several decades now ever doing this. I do see some banks saying they do this and I wonder why anyone would choose to be their customer because there's plenty of market choice out there in banking.

Likely they do it because they can and it's a vendor lock-in mindset from their customers. People have banked with them their whole life or their parents banked with them etc.. so they feel like this is the better deal. I've seen credit unions doing this. Credit unions talk about how great their services are and how much better it is to be with a credit union but I see them charge all kinds of horrible fees as well. It's also much more difficult to get a hold of someone 24/7 with a credit union if you have banking needs.

I think there's still a lot of legacy banking attitudes like you need to go into an office and sit down and talk to somebody. Which usually necessitates you having to take a day off of work because banker's hours are called bankers hours for a reason. I myself choose to bank with someone who will be available on my schedule not on their schedule.

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

#4

Post by toomuchtodo »

As a financial services provider, you can make money in a couple of ways: net interest [1], loan interest (spread between your deposit interest and interest rates you price for credit products), fees, and interchange (skim off debit and credit card transactions). Which matrix of fees you elect to implement is a function of your customer persona(s), what they value, and sensitivity to those income levers.

How do you pay to operate your business without income? You need to pay for people, infra, and other costs of banking provided. The only model that works for that is postal banking or deposit accounts issued by the central bank, where your nation state offers banking as a utility in some fashion.

[1] https://www.kalzumeus.com/2019/6/26/how-brokerages-make-mone...

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

#5

Post by exabrial »

toomuchtodo wrote: post #4

As a financial services provider, you can make money in a couple of ways: net interest [1], loan interest (spread between your deposit interest and interest rates you price for credit products), fees, and interchange (skim off debit and credit card transactions). Which matrix of fees you elect to implement is a function of your customer persona(s), what they value, and sensitivity to those income levers. How do you p…

Interest on deposits includes IORB from the federal reserve, which is the safest investment for them, current > 4%

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

#9

Post by SoftTalker »

Vaslo wrote: post #6

Nobody with good credit ratings is paying these fees. Exception maybe being those folks who want those fancy AMEX Black Card or whatever those cards are with concierges, etc.

Yes it's for people who have not demonstrated that they can use credit responsibly, not overdraft their accounts, etc.

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

#10

Post by SoftTalker »

pestatije wrote: post #8

Most banks dont charge for standard non-business accounts, neither for debit cards...where are you seeing these fees/charges?

Even for business accounts. I have a "business" account, opened for some contract work I did years ago, it has very little activity, but I pay no fees and have a debit card. I keep it open "just in case I need it" because it doesn't cost me anything.
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