Bank of America testing fees in Mass.

Lender seeks revenue from checking accounts

By Todd Wallack
Globe Staff / January 6, 2011

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Bank of America will begin testing a new slate of checking accounts in Massachusetts and two other states later this month in an effort to generate more revenue from customers.

The range of fees for the test accounts — from $8.95 to $25 a month in Massachusetts — will be similar to those for existing accounts, but the details and conditions will vary.

For instance, for the first time in years, the bank will offer a basic checking account with a mandatory monthly fee. But the bank will continue to offer ways to avoid the fees on other accounts, for example by maintaining a minimum balance of $2,000, using a credit card once a month, or linking an account to a Bank of America mortgage.

And the bank plans to offer special perks, such as special attention from customer service or better rates on deposits and loans, for customers who keep at least $50,000 in savings or investment accounts.

Bank executives said they need to make the changes to help cover the cost of new regulations and other expenses. The bank estimates it costs an average of $200 per year to service a typical checking account.

And Susan Faulkner, who oversees the bank’s deposit and card products, said the new menu of options also better matches what customers want, and therefore helps the bank retain and attract customers.

“When you provide value to customers, customers come back and stay with you,’’ Faulkner said.

Bank of America said the accounts will initially be offered only to new customers and that it could tweak the structure of the accounts, depending on the results of the tests. But it plans to offer the new accounts to existing customers later this year and eventually switch remaining customers over the next two years.

The changes come as most banks are looking for new ways to generate revenues because of new rules from Washington. Those include limits on overdraft fees and the fees banks charge merchants for debit card transactions. Institutions are also facing higher assessments from the government to cover the cost of bailing out failed banks.

Moreover, banks say they are making less money because of weak demand for loans and extraordinarily low interest rates on government bonds and other low-risk investments.

“They have to charge the fees,’’ said Ajay Nagarkatte, managing director of research for the Bank Administration Institute, an industry research group. “Over the next year and a half, we are going to see a lot of combinations and permutations of fee assessments.’’

For instance, Citizens Bank recently announced plans to charge customers $4.99 a month for its popular Personal Green checking account unless customers maintain a $1,500 balance or make at least five payment transactions each month. And many banks are also now charging more for other basic services, such as ATM use and paper statements.

But Bank of America’s decision to overhaul its customers’ accounts is particularly noteworthy because of its broad reach. The largest bank in the country, it has nearly 5,900 branches, including 285 in Massachusetts, and serves roughly half of all American households.

Bank of America plans to keep one current account in its new lineup.

In August, it unveiled an eBanking account that costs $8.95 a month, but waives the fee for customers who do their banking entirely online or through ATMs.

In addition, the bank plans to test a stripped-down account, called “Essentials’’ with a mandatory $9 fee for customers in Massachusetts.

Unlike current accounts, those enrolled in Essentials won’t be able to pay bills online for free.

A second new account, called “Premium,’’ will cost $15 a month unless customers either maintain a $5,000 minimum balance, use a Bank of America credit card at least once a month, or add $2,000 to the account every month.

A third new account, labeled “Enhanced,’’ will cost $25 per month unless holders maintain at least $20,000 in deposits and investments in certain accounts or link their accounts to a Bank of America mortgage.

The bank is also testing the accounts in Arizona and Georgia.

Todd Wallack can be reached at

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