Chase Introduces New Checkless Accounts with Lower Fees
It may be surprising to some but, according to a 2017 Federal Deposit Insurance Corporation (FDIC) report, 6.5% of households in the United States don’t have a traditional bank account. There are many reasons why Americans are unbanked but, anecdotally, rising fees are among the biggest reasons for what’s keeping some away. Now one big name in banking is introducing a new type of account with a reduced flat fee.
Reuters reports that JPMorgan Chase is introducing new accounts with no minimum balance requirement and a flat $4.95 a month fee. Account holders will be able to enjoy free check cashing, access funds via a debit card and ATM, and be able to use the bank’s mobile app.
Chase’s new accounts are positioning themselves as alternatives to check cashing stores or other financial services often utilized by lower-income adults. According to Chase Consumer Banking chief executive Thasunda Duckett, such services could cost consumers between $200 to $500 a year in fees. Meanwhile Chase’s new accounts likely charge users less than $60 a year.
Adding to Chase’s pitch to low-income adults is the fact that these new accounts won’t allow for overdrafts. While Reuters notes that overdraft fees have been a big source of revenue for banks, they’ve also served to erode consumer trust in such institutions and inspired regulation to curb them. Moreover, in her book The Unbanking of America, author Lisa Servon spoke to several cash checking store customers who purposely no longer held bank accounts after being burned by overdraft fees and other bank charges in the past. In these cases, Servon notes, the customer’s actually preferred alternative services because their fees were so clearly disclosed and expected.
Incidentally Chase isn’t the first major institution to offer such account options, with Bank of America Corp and Citigroup both making similar plays. Elsewhere many online banks have accounts that don’t charge overdraft fees, maintenance fees, or require minimum balances — with some even offering high-yield savings, cashback debit cards, reimbursed ATM fees, and more. Of course these online and FinTech banks do come with the notable disadvantage of not having brick and mortar branches customers can visit when needed.
While Chase’s $4.95 a month account may not match the free accounts some online institutions offer, the fee is in line with what the check cashing stores charge, and is often significantly lower than those competitor’s fees. Perhaps the biggest obstacle Chase will have attracting customers to these new accounts is building trust among those who may have had bad banking experiences in the past. While a lack of minimum balances and overdrafts are a good start, it remains to be seen if these changes will be enough to bring unbanked adults back to the big institutions.