Walmart is about to give traditional banks a run for our money.
For a $9.95 a month fee, if you don’t have $500 in the account, you will be able to get free checking — no extra fees. The banks have been cleaning up on overdraft charges and bounced check charges. In 2013, they pulled in $32 billion from overdraft fees.
That source of easy money is about to be challenged.
I am not sure banks really want the kinds of customers Walmart caters to. They want middle class customers, upper middle class customers, and rich customers. They want the 20% of the customers who have 80% of the money. I have a friend in Arkansas whose job at a major regional bank is to find and attract these people. It is a sophisticated business.
The free market caters to people at the bottom. The dollar stores do. Walmart does. They make high quality products and services available to people who have less money. The name of this game has always been the same: price competition. In four words: Save money. Live better.
This will put pressure on banks. It will also put pressure on dollar stores. This is good for customers. “Under the free market, they ask continually: “What have you done for me lately?” They make this threat: “I can always take my business elsewhere.”
Anyone who is over 18 years old will be able to get a checking account. If he has $600 to deposit, he will not have to pay anything, and he will have $100 headroom to write checks.
Bank customers who are not Walmart shoppers will ask their banks: “Why don’t you offer a program like Walmart’s?” Word will get out. Save money. Live better.
High-priced check-cashing companies that service the poor will also take a hit. Word will get out. Save money. Live better.
Whether this service will work is up to the customers to decide. Will Walmart be able to handle customers’ questions? Will it all run smoothly? We will find out. Customers get the final say under capitalism, as long as the government stays out of it.