Death by a Thousand Cuts: How Banks Use Hidden Fees to Peck Away at Your Finances

Jan 8, 2018 | Jessica Ogilvie

Banks love their customers. Right? That’s why their advertising campaigns are so appealing; they know us. They see us. They understand us.

But in some cases, they might understand us a little too well. While many traditional banks claim to offer free business accounts — pandering heavily to small-business owners in the process — it turns out that’s rarely the case. Instead, many banks are slipping in fees here and there that customers don’t even know they’re paying.

Seed recently conducted a survey to find out what small-business owners get from their current banks, and what they’d love to see done differently. And some of the results were… disturbing.

Many entrepreneurs believe that they can trust the bank with which they hold a personal account for their business needs as well; in fact, 63 percent of our respondents use the same bank for both. But that’s not always the best choice. Many large banks charge fees for not holding a minimum balance — and if you’re just starting out, those balances can be hard to maintain.

You’ll Get Punished for a Low Balance

Seed looked at fee structures for a number of major banks and found that what looks like a good deal entirely depends on how much money you already have in the bank. Let’s start with JPMorgan Chase. The Wall Street conglomerate offers three types of business accounts, which require customers to hold between $1,500 and $100,000 at all times. Should you drop below that, you get hit with fees ranging from $12 to $95 a month.

Wells Fargo isn’t much better; while it offers a business account that doesn’t require a minimum balance, it comes with an automatic $20 monthly fee. The other three business accounts require minimum holdings of $500 to $25,000, charging between $10 and $40 a month if customers drop below. For established companies, these can be non-issues, but for freelancers and startups with fluctuating accounts and expenses, these fees can sting.

BankMinimum BalanceMonthly FeeDoes Minimum Balance Waive Fee?
Chase Total Business Checking$1,500$12 or $15 if paper statementsyes
Chase Performance Business Checking$3,500$30yes
Chase Platinum Business Checking$100,000$95yes
Bank of America Business Fundamentals$5,000$13yes
Bank of America Business Advantage$1,500$29.95yes
Wells Fargo Business Choice Checking$7,500$14yes
Wells Fargo Platinum Business Checking$25,000$40
Wells Fargo Simple Business Checking$500$10
Wells Fargo Analysed Business CheckingN/A$20N/A
CitiGold$200,000+ in eligible linked deposit, retirement and investment accounts.NoneN/A
Citi Priority$50,000+ in eligible linked deposit, retirement and investment accounts.$30yes
Citi Bank Account$10,000+ in eligible linked deposit, retirement and investment accounts.$25yes
Basic Banking$1,500+ combined average monthly balance in eligible linked accounts.$12yes
Affordable Access$1,500+ combined average monthly balance in eligible linked accounts.$10yes
US Bank Platinum$25,000$25
US Bank Gold$10,000$20$10,000 average collected checking balance or $25,000 average collected checking balance on interest bearing option
—- or —-
$20,000 in combined average collected deposit balances or $50,000 in combined average collected deposit balance on interest bearing option
—- or —-
$50,000 combined average collected business deposits and outstanding business credit balances15 OR $75,000 in combined business deposit and outstanding business credit balances on interest bearing option1.
US Bank Silver$1,500None
US Bank PremiumNone$20 tax/fee for OR can’t be waivedAnalyzed account; maintenance and transaction fees can be offset by an earnings credit based on account balance.
Capital OneNoneNoneN/A
PNC PreferredNone$50yes, or $3,000 net monthly purchases, or have a CC.
PNC Plus$25,000$20yes, or $2,000 net monthly purchases, or have a CC.
PNC$5,000$12yes, or $1,000 net monthly purchases.
First Internet Bank - Small Business$10,000$25yes
First Internet Bank - Commercial Premium$25,000$15yes
First Republic - Simplified Business Checking$15,000$30yes
First Republic - Business Interest Checking$15,000$30yes

Hidden Fees Are Tucked Into a Bunch of Bank Services

Monthly fees aren’t the only ways that big banks make money from their small-business customers. In our survey, we found that

  • 37 percent of entrepreneurs pay a fee to complete wire transfers,
  • 16 percent are charged for paying bills through their bank, and
  • 13 percent pay the bank for ACH transfers (direct deposit)

That’s a lot of money going back into the hands of bankers, often in ways that aren’t obvious at the outset. And unless you’re tracking every single transaction at all times, it’s entirely possible that these fees are slipping by unnoticed.

So, the return for all this extra money shelled out must be pretty amazing, right? Not necessarily. Nearly a third of our respondents aren’t able to pay their bills online or on their phones (and, as we noted, many that do are charged for the opportunity). Up to 84 percent weren’t able to access any kind of meaningful cash flow data via their phones. And for entrepreneurs looking for financial advice? Go somewhere else. Up to 76 percent of the folks we talked to don’t get any type of assistance in managing their business.

We Believe in the Customer

That’s what we’re hoping to fix with Seed. Customers are offered an account with no monthly service charge (and $25 per outgoing wire), and effective bookkeeping and reporting tools, along with awesome customer support, to help keep your business running smoothly. We believe in making things easy for your small business — because we’re a small business too.

In the coming months we’ll look at other ways traditional banks take advantage of customers, what you need to look out for, and how Seed can help you start, manage, and grow your business.

Seed is available now in the US. Apply for an account.

Banking Services provided by The Bancorp Bank, Member FDIC. The Seed Visa® Business Debit Card is issued by The Bancorp Bank pursuant to a license from Visa U.S.A. Inc. and may be used everywhere Visa debit cards are accepted. The opinions, findings, or perspectives expressed in this content are those of the author and do not reflect the official policy or position of The Bancorp Bank, its affiliates, or their employees.