Beginning August 1st of this year, JP Morgan & Chase Co. will charge their customers for depositing cash into their accounts.
According to an internal document sent to account holders, in less than a month from now “the fee for all types of Cash Deposit Processing (CDP) will be $0.25 per $100 [deposited]. The CDP fee will only apply after you exceed your account’s cash deposit limit.”
One reason for Chase to charge their customers a fee on cash deposits may reside in the fact that the major banks are “charging customers who deposit lots of cash.”
Wherein Chase is charging customers for every $100 in cash deposited, other banks are charging on every cash deposit of $10,000; or $0.20 on every $100 deposited.
Kris Dawsey, economist for Goldman Sachs, warned about banks charging customers fees for simply depositing cash into their account in 2013.
When asked about a meeting of the Federal Reserve (Fed) Board and the Federal Open Market Committee (FOMC), wherein it was revealed that the 0.25% annual interest rate on money that the banks keep in the Fed would be reduced, Dawsey said: “One risk is that the move could prompt charges … on bank deposits.”
Last November, Kristin Lemkau, spokesperson for JP Morgan & Chase Co said: “We have no intention of charging for retail customer deposits.”
However this promise has not been kept.
David George, analyst for Robert W. Baird & Co, explains that the financial institutions “would need to find alternative revenue sources to compensate” because of this decline in the Fed’s interest rate and fees on deposits “would be the most likely” option.
George said: “Having a bank account is a service, like the water and electric bill. And it has become less and less profitable.”
Wayne Abernathy, executive vice president of the American Bankers Association confirmed: “Banks could respond to a drop in the Fed’s interest rate by charging a fee to large business customers that hold millions of dollars in savings accounts. Banks must bear the expense of managing that money.”
Analysts say the Durbin Amendment within the Dodd Frank Act which limited fees imposed by merchant retailers onto banks who issue debit cards “has effectively hit consumer-banking revenues pretty hard.”
When accessing debits, banks view checking accounts as high-risk and costing “a lot of money” to the banks.
Insurance is taken when banks impose a minimum balance to the account to ensure the customer retains specified funds by which the bank can manipulate; however this does not equal high revenue for the banks in the long-term.
When a customer deposits money into a bank, the bank essentially issues a promise to have those funds available when the customer returns to withdraw the deposited amount.
When the same customer withdraws funds from their account (whether checking or savings) the customer assumes that the bank has enough funds to cover their withdrawal; including the presumption that their monies are separate from the bank’s assets.
Another reason for charging customers for depositing cash would be to quell investor concerns about a possible run on the banks because of the rising debt and public fears of a relapse of the global recession.