What's behind the overall 66% rise in fee complaints over three years? McLaughlin, the savings executive, believes the anger reflects the reality of dealing with massive financial institutions. "Bigger banks have gotten very creative at coming up with new fees, while also not passing along profits gained from high interest rates to customers," he said.
Credit card fees. Along with prepaid cards, credit cards are the target of more than two-thirds of fee-related complaints. Some cards charge an annual fee. Most balance transfer cards – a tool for the faster pay-down of balances – charge a fee of 3% to 5% of the transferred balance. Nearly all charge a foreign transaction fee to compensate for currency differences. Consumers are advised to read offerings painstakingly when choosing a card.
Jennifer, of Jacksonville, Florida, is not very pleased with Aspire Visa's fee system. "They just had the nerve to send me an email saying I may qualify for a credit increase of $250, but I would have to pay them a one-time fee of $49.95 if approved," Jennifer wrote in a review posted on ConsumerAffairs.
"My credit has improved and all my cards have just given me an increase. I will be paying off and canceling this card right away."
Overdraft fees. The head of the CFPB earlier this year called overdraft fees "a massive junk fee harvesting machine." JPMorgan Chase and Wells Fargo have been especially charge-happy, accounting for about one-half of overdraft revenue reported by big banks in 2022.
The agency has proposed closing the loopholes that allowed banks to feast on $30 to $35 overdraft penalties. For years consumers have been especially aggrieved by how a series of debit card purchases on a single shopping trip will rack up multiple $32 fees before they learn that they have overdrawn their accounts. A bank's cost of covering the temporary deficit can be as low as $3.
Sometimes consumers do nothing wrong and still get charged. Sara, of Burnsville, Minnesota, claimed that U.S. Bank held a cashier's check for eight days, causing her account to go negative.
"[I was] charged overdraft fees, and then [they] said, 'Sorry there is nothing we can do, have a nice day,'" Sara wrote in her review. "There is no reason to hold up a certified cashier's check, NONE."
Consumers who use payday, car title or pawnshop loans also seem increasingly prone to nonsufficient funds (NSF) fees. The CFPB reports that these borrowers are also hit with fees for "rollovers," extended repayment plans and when loans are loaded onto prepaid debit cards.
Bank fees. Large banks charge fees if balances fall below a certain level. They also can charge account maintenance fees, fees for not having a certain number of monthly transactions, fees for making too few direct deposits and fees for making transfers or transactions.
"Some of these fees may be things you'd never think to ask about," McLaughlin said. "So it's always a good idea to take a close look at both the terms and conditions as well as your account charges so you know if any of these fees are eating away at your savings."
Swipe fees. Craig Shearman, a spokesman for the Merchants Payments Coalition, which lobbies for payment system reforms, says swipe fees are most merchants' highest cost after labor and drive up prices by over $1,000 a year for the average family, adding to inflation. That's because while consumers don't pay these fees directly, the merchants, gas stations and restaurants that do pay them are simply passing them along to consumers, often adding 3% to a charge.
"The answer for saving on swipe fees is for Congress to pass legislation to make banks and card networks compete over these fees the same as other businesses compete over pricing, quality and service every day," Shearman said.
Reformers versus the opposition
In early March, the CFPB finalized a rule that limits credit card late fees to $8, the estimated actual cost to banks to cover the shortfall.
While the CFPB's proposed rule suggests hope for fee-weary consumers, banks and credit card companies aren't giving up without a fight. The U.S. Chamber of Commerce said it will sue CFPB to block the rule's implementation. Chamber Executive Vice President Neil Bradley said that for most consumers the new rule would drive up credit costs and tighten credit.
The rule, Bradley said, "punishes Americans who pay their credit card bills on time by forcing them to pay for those who don't. This will result in fewer card offerings and limit access to affordable credit for many consumers."
Bradley also said the CFPB has exceeded its legal authority in proposing the rule. Left unsaid is the impact the new rule would have on big banks' stock prices. A reduction in revenue from fees could reduce profit margins, causing big bank stock prices to fall. Wall Street has an interest in maintaining the status quo.
Mansfield, the law professor at Case Western Reserve, wouldn't venture a guess as to whether banks will be able to block the proposed rule from taking effect, but she said she is encouraged by the attention the issue is receiving.
"Junk fees are certainly a big issue for the Biden administration, as it should be," she said.
She believes the issue with bank fees of all types is one of transparency, noting that the European Union has stronger rules requiring companies to announce the size of fees to be charged in advance so consumers aren't surprised by seemingly fluid fee decisions. "If the price you saw was actually the price you're going to pay, you could make more informed decisions," she said.
Mansfield said her big concern is that caps on overdraft fees and credit card late fees could lead to more and higher fees elsewhere. For example, instead of covering the overdraft and charging the consumer $8, the bank could simply bounce the check and charge a bounced check fee, something she said regulators need to consider.
In the meantime, if banks can't make a profit on credit card or overdraft fees, Mansfield says they'll explore other avenues. "Will they continue to make money off of us?" she asked. "No question."
In the meantime, what can consumers do?
Consumers can vote with their feet, says Gabe Krajicek, CEO of Kasasa, which operates a small bank rewards program. Big bank customers should consider the savings if they move their accounts to a smaller community bank.
"Because of their size, structure, and local focus, they have less overhead and can offer lower fees and higher returns than megabanks," he said. "Now is a great time to search. There are community banks and credit unions that offer accounts with no minimum balance requirements to earn rewards, no monthly maintenance fees, nationwide ATM fee refunds, and free high-yield checking accounts — many greater than 5%."
Kasasa-affiliated banks also refund out-of-network ATM fees if the depositor makes a certain number of monthly debit card transactions, another reason consumers might consider switching to a smaller bank.
McLaughlin says some consumers mistakenly believe their money is safer in one of the major, "too-big-to-fail" banks, pointing out that the Federal Deposit Insurance Corporation (FDIC) covers all banks, large and small.
"No consumer has ever lost money in a federally insured account, as long as they abide by the guidelines," he said.
Another thing that consumers can do is complain: The analysis of CFPB data shows that 26% of people who complained to their bank or credit card issuer got a resolution in the form of money back.
In the age of social media, banks would like to contain customer dissatisfaction. A refund is a small price to pay to head off a potential viral post.
