TD Bank's redesigned checking lineup is widely varied but has a common thread — for five of its six new accounts, paper statements can cost a dollar a month.
In attaching part of its monthly fee to paper statements, TD is joining a growing cadre of financial institutions encouraging consumers to reduce their reliance on costly paper. Its move is more sweeping than most, in that the paper-statement fee applies to nearly all of its new accounts.
The U.S. unit of Toronto-Dominion Bank on Monday launched a suite of new checking products, and all but the student account carry a monthly fee that in most cases can be waived by meeting minimum average daily balance requirements.
A dollar of each of those fees is related to paper statements; customers who turn off paper can get a dollar of their monthly fee waived even if they do not meet the minimum balance needed to waive it entirely. The monthly account fees range from $3.99 to $25.
"They're taking a very simplistic, straightforward approach," said Robert Hunt, senior research director in the retail banking practice group at TowerGroup. "It's a very simple decision to make on that dollar, quite frankly."
Many banks have been working to promote the concept of banking with less paper, whether by charging a small fee to receive statements or images of checks, or by giving customers incentives to bank online in an effort to cut costs and thus offset a loss in fee revenue as a result of new regulations.
TD's approach is part carrot, part stick, observers say. Though its statements cost a dollar, waiving that fee by switching off paper may be viewed as a reward by a customer who cannot meet the requirements to get the entirety of the monthly fee waived.
Mary Beth Sullivan, a partner at the financial services consulting firm Capital Performance Group, said that by framing its statement fee as a discount, the bank "is reducing a negative."
However, for some customers the nominal fee will be worth it.
"People will pay for things they actually value. And they value paper statements," Sullivan said. "There is some customer out there that for whatever reason wants that paper statement. I can't say they want it badly enough that they'd pay a great deal for it, but they'd pay something for it."
Ron Shevlin, a senior analyst at Aite Group, said customers paying the lowest monthly fee TD offers may, ironically, be the most motivated to trim it further by switching off paper statements. "When you're paying out $4 a month, saving a quarter of that by getting paperless statements is definitely a good incentive," Shevlin said.
John Rosenfeld, head of retail deposits at TD Bank, estimates that the majority of the bank's 6.5 million checking account customers receive paper statements. The $1 discount is roughly in line with the cost per statement, he said.
"Industrywide, paper statements are still very much the standard, and I think every bank in the industry is trying to move toward paperless," Rosenfeld said. "We wanted to encourage them in a positive way to do things like go paperless as opposed to try to discourage them from doing things they may want to do."
Rosenfeld said that the bank will monitor the effectiveness of the dollar discount, but that he expects it to "drive a significant lift in paperless statements."
Other banks that have tried to wean customers off paper include Bank of America Corp., which in February implemented a $3 monthly fee for consumers who choose to receive images of their canceled checks along with their statements. And last summer B of A rolled out an account that waives the monthly fee only if consumers elect to receive their statements online.
On the other hand are banks like Citizens Financial Group Inc. The Royal Bank of Scotland Group PLC unit's Green$ense program rewards customers by paying them 10 cents every time they make a paperless transaction, whether it be using their debit card, paying a bill online or having a payment automatically charged to their checking account. As a condition of enrolling in the program, customers must opt out of receiving statements.
"All banks are looking at opportunities to get more customers to use paperless statements because [they are] expensive or to get them to pay … if they want paper," Sullivan said. "We'll end up as an industry … where all statements are electronic or you'll have to pay for them."
As part of the product refresh, TD Bank eliminated its Value checking account, which had a limit on the number of transactions customers could make in a month, and replaced it with TD Simple. At the same time, it enhanced five other checking account products.
Existing customers can remain in the accounts that they have if they don't choose to switch to one of the new accounts, Rosenfeld said.
While the Federal Reserve Board's proposed 12-cent cap on debit interchange fees was a large factor in the bank's decision to revamp its checking products, Rosenfeld said TD is not trying to discourage debit use in any way. "There are a lot of open questions with regards to the long-term profitability of debit as a feature of checking," he said. "But at the same time we see it as a huge convenience that we'd never take away from customers. We're really not trying to change behavior with debit or paper checks with these product changes."
Shevlin said the new product suite "places a much greater emphasis on consumers in terms of really understanding their checking account behavior, their payment behavior and puts a much stronger onus on them to choose the right package."
The Simple account charges a flat monthly fee of $3.99 no matter the balance.
Its Convenience checking product is free for those who maintain a low average daily balance of at least $100. The fee is $15 a month if the minimum is not met.
TD's Premier checking requires customers to maintain a higher average daily balance of at least $2,500. This account has a fee of $25 for those who can't meet the balance requirement. The features include a tiered interest rate and unlimited free non-TD Bank ATM transactions.
The bank's Relationship checking account also has a $25 monthly fee for those who fail to meet the combined deposit and loan average daily balance requirement of $20,000.
This account offers a number of product features designed to reward those for having a deeper relationship with the bank, including a flat interest rate, a safe deposit box discount and overdraft protection transfers.
The bank also offers an account designed for the 60-plus population and a totally free student checking account.
In all accounts with a monthly fee, a dollar of the fee is tied to whether the customer gets paper statements. For example, the Simple account costs $2.99 a month for those who turn off paper.