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
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
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
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
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
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. …