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Tuesday, March 13, 2012

This time, it’s different: Wells Fargo to end free checking (for some)

Observation:   Last week, a report from the Associated Press explained that Wells Fargo will roll-out a $7 monthly fee for checking accounts that were previously free… unless customers maintain a $1,500 minimum balance, or direct deposit at least $500 per month.  Click here to see the story as it appeared in Crain’s New York.

The fees will roll-out gradually beginning in May, and beginning with six states, according to this story from KSTP News in Minneapolis. 

Eventually, the rate will be in place in each of the 39 states that Wells Fargo serves.

Implications:   So why has Wells Fargo avoided the outcry of unfairness that was cast on Bank of America a few months back when they tried the same move?  I suspect it’s because Wells Fargo did a better job of explaining that the move would not affect customers across-the-board, but that it would impact folks who don’t do much business with the bank anyway.  It seems to me that Wells Fargo is thinning the customer herd.

In the story, one critic complain that the bank is being unfair to folks who are unemployed or on low fixed incomes, but I’m not sure they’re being any less fair than any business that expects to be paid for products received or services rendered.  (Most companies target consumers with incomes.)  Another critic warns that Wells Fargo will lose much more in the way of customers who walk away than from the income these new fees will generate.  I’m betting the folks at Wells Fargo have calculated that trade-off, and are at peace with their decision.

Many companies focus on customers they wish they could have.  But have you thought about those customers that could actually be costing you more than they are likely to be worth, in terms of economic return?  

In the face of rising energy and commodity costs, is it likely that you will have to raise prices on some products or services in the next few months or years?  What can you learn from the way that Wells Fargo has introduced—essentially—a price hike?

Mike Anderson, for the Elm Street Economics consumer trends blog. A service of The Center for Sales Strategy, Inc.

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