Well Of Course

The headline is “AP: Wells Fargo customers soon will pay $7 checking account fee.”  It’s accompanied by a picture of Wells Fargo’s CEO, a picture that makes him look like he eats babies for breakfast.  The first paragraph reads:

Customers in California and six other Western states soon will pay a $7 checking account fee, the Associated Press reported today.

It’s misleading.  The next paragraph reads:

According to the AP, customers with a minimum balance of $1,500, or who make direct deposits of at least $500 a month will not be charged the fee.

That’s a different story.  Meeting the second requirement ($500 direct deposit) is pretty easy for most families, and if you do, voila, your account appears to be free.  That first paragraph should read “some customers,” or more accurately ”unprofitable customers.”

Most checking accounts at banks are marginally profitable or losers, especially in today’s interest-rate environment.  It is pretty obvious that Wells is targeting the least profitable, or biggest losers.  Nothing onerous about that at all.

It is also probably not the case that low-income people will be the ones paying the bulk of the fee.  The amount is set low enough that if unemployment payments were directly deposited, the account would meet the minimum.  Even Mississippi, the state with lowest unemployment compensation, pays an average of $190 a week, well above Wells Fargo’s minimum monthly automatic deposit.

Actually, I think few people will pay the fee.

Most people who would pay the account fee are like me.  I have a condo I rent out, and the tenants don’t have a checking account.  I set up an account near my tenants to make it easy for them to pay their rent.  Since they always pay in cash, I wouldn’t meet the automatic deposit criteria if the account was at Wells.

I could meet minimum amount criteria, if I elected to not sweep out the money monthly.  That would be the equivalent of a 5.6 percent interest rate on the $1,500 I would have to leave in to avoid the fee.  Can’t beat that for an insured deposit, and that is exactly what Wells is hoping their customers do.

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