As Banks Get Bigger, Fees Rise This Week's Mega-Mergers Potentially Offer Customers More Services and Convenience - but at a Price

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Twenty-five years ago, Patricia Covello opened a bank account with Lincoln Savings Bank in New York City. In exchange for keeping her money, the bank charged no fees. Two bank mergers later, the Manhattan nurse is now paying as much as $30 per month to the Dime Savings Bank, the surviving bank.

"There are so many extra charges, it's incredible," she groans.

While stockholders cheer the accelerating pace of mergers among America's banks - this week saw two more mega-mergers - consumer groups are warning that Ms. Covello's experience is not unique. They warn that the consolidation of the banking industry may create major problems, ranging from the potential for catastrophic financial collapses to lower interest rates on deposits. But the mergers of NationsBank and BankAmerica into the country's first coast-to-coast bank and First Chicago and Banc One into a huge regional bank may also give consumers a wider variety of services - from mutual funds to more convenient automatic teller machines - even if they have to pay more for them. "From the consumers point of view, it could be a bit of a mixed bag," says Robert Dederick, an economist with Northern Trust Company in Chicago. Take ATM fees, says Donald Ratajczak, an economist at Georgia State University in Atlanta. With branches in 22 states, he notes, the new BankAmerica will be able to offer its customers the opportunity to access its cash machines in more cities, whether they're living in Atlanta or on vacation in Seattle. That can save consumers money because increasingly banks are charging ATM users extra fees if they're not members of that bank. Covello, the Manhattan nurse, for example, was recently visiting San Francisco where she used an ATM. "They charged me double and then my bank charged me again," she complains. Last year, in an annual report to Congress, the Federal Reserve found that in 1996 the average fees for banks that were part of multi-state operations "were in most cases significantly higher" than the average fees of banks that were not part of such organizations. For example, the Fed found average fees for stop payment orders were $4 higher for multi-state banks and $3 higher for Not Sufficient Funds checks and overdrafts. Annual non-interest checking fees came to $91.59 for large banks compared to $73.56 for smaller banks. ATMs as Cash Cows The same is true for using ATMs. The US Public Interest Research Group (USPIRG), annual survey of ATM charges, found that big banks charge larger fees than smaller banks. "They exert monopoly muscle rather than pass on the economies of scale that accrue to the bigger business," says Edmund Mierzwinkski, a consumer advocate for the Washington-based watch dog group. The merger trend may be accelerating this process. In 1996, when Nationsbank purchased Boatmen's National Bank of St. Louis, it quickly raised its fees. Some customers fled to the smaller, local banks. But "a lot of the other banks quickly followed Nationsbank in raising fees," says William Plasencia, a director of the Bank Rate Monitor, a Palm Beach, Fla.-based company that follows banking trends. If the banking markets continue to become more concentrated, free ATM usage may go the way free toasters for new deposits, predicts Ken Guenther, executive vice president of the Washington-based Independent Bankers Association, which represents small banks. …


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