Bank of America is introducing a new checking account that requires no minimum balance and is free – as long as customers don’t want paper statements or much face time with tellers.
The new eBanking account, introduced late Wednesday night, is a signal of how the Charlotte bank could come up with cheaper ways to offer checking accounts rather than getting rid of free checking altogether. Analysts have been speculating that banks would dump free checking as a means of dealing with massive new regulations that limit many of the fees they have been used to charging. Bank of America got rid of overdraft fees recently in response to the regulatory environment and had hinted that it would have to replace the lost income.
David Owen, the bank’s payments product executive, said eBanking is a response to what customers are saying they want. “How they’re thinking about banking has evolved and changed through the economic cycle – how, when, where, why,” Owen said. “One segment of customers is telling us, Let them bank on their terms. They’re very comfortable with the ATM, with text banking, with mobile banking.”
At the same time, Bank of America is sunsetting its free checking program for college students. Its other checking accounts carry monthly fees unless the customer maintains a certain balance or meets other requirements.
The eBanking account will not require customers to maintain a minimum balance. It will be free for customers who agree to receive their monthly statements online instead of in the mail, and to use ATMs instead of tellers for withdrawals and deposits. Otherwise, customers can still sign up for eBanking, but they’ll have to pay an $8.95 monthly maintenance fee.
Directing customers online and to ATMs can translate to big savings for the banks on labor and other costs that come with brick-and-mortar buildings. Bank of America says that customers will not be charged for visiting tellers for other reasons, such as getting advice on banking questions.
Mike Moebs, chief executive of economics research firm Moebs Services, called the new account “a great idea,” and said that other bank may follow suit. “This in many respects is a no brainer - it’s a good use of technology, this is not a hard change (on the sytems), it reduces their branch costs and their operational costs,” Moebs said.
Moebs said he thinks eBanking is part of a bank plan to trim lower-income customers, who can carry more risk. He expects that eBanking is aimed at college students, and also at reaching their upper- and middle-class parents.
“Here’s the negative: If people think this is going to go to the lower middle class and the poor, that’s not the market Bank of America wants,” Moebs said, noting that lower-income families are less likely to have reliable Internet access.
The eBanking accounts have been favorably received at a pilot program in Georgia, which kicked off in November. A third of all new checking accounts there have been through eBanking, Owen said.
The account will be available nationwide August 6.