Banks are beginning to announce their annual pricing and fee increases, and the new costs will go into effect on January 1, 2024. The hikes could be steeper than usual, potentially in the 10 to 15% range for some line items, given that many institutions waived increases during the pandemic and are now eager to pass on a portion of their rising costs to their customers. With the average company paying around 180 different banking fees per banking relationship and total treasury fee costs adding up to tens of thousands of dollars depending on transaction volume, many companies are looking at a material impact on the bottom line come the new year.

Take action now to book a Q1 rate review to manage against pricing increases.

Take these four steps ASAP to keep 2024 treasury fees in check.

Higher bank fees do not have to be accepted out of hand, and companies can significantly influence the costs they will incur. The key is to review and reduce fee structures before the end of the year, when the new, higher prices take effect. Here’s a game plan your company can follow to take control of bank fees now.

• Stay tuned for fee increase announcements.

Since most enterprises have relationships with multiple banks and all banks have different rate structures, managing the details of annual fee increases is no simple task. However, the Federal Reserve requires banks to disclose material bank fee increases, and most banks disclose their increases regardless of whether they meet the materiality criteria.  Stay tuned for communications that are likely already flowing in, and pay careful attention to the information the banks publish on their portals.

Keep in mind that the forthcoming rate increases will not be across the board. Banks have more than 3,000 fees they can potentially charge, but the fees most likely to increase each year are related to brick-and-mortar services that require human intervention. 

It’s a good idea to review the fees your business is currently paying and understand which potential increases are the most likely to have the greatest budgetary impact on your business. This is also an excellent time to do a little housekeeping and consider if there are services you are paying for that you don’t really need. 

• Understand what bank fee increases really cost your business.

Many CFOs and finance departments assume they must accept bank fees as a necessary evil. Others don’t have the time or bandwidth to devote to managing the complex bank fee landscape. Still, others do not even consider the fees because they often don’t cause obvious pain: if balances are high enough to offset the charges, their fees are out of sight and out of mind.

However, companies paying higher Treasury fees than they need to are forfeiting significant value.  Those who are proactive about reducing their fees and increasing their earning credits can generate significant balances over and above the peg balance, and these funds can be leveraged to earn interest income in another account, such as a money market, hybrid, or sweep account. Alternatively, balances could be used to pay down debt at a higher rate or even to fund employee raises, which can help your company retain the best people and offset the high cost of turnover.

Ultimately, even if your company isn’t cutting a check or seeing a debit for the monthly treasury fees you incur, you are still sacrificing significant sums of money that could be put to a multitude of uses within your business. 

• Conduct a Treasury fee review and strategically lock in lower fees before 2024 pricing goes into effect.

Any company that has not recently conducted a treasury fee management review will find that now is the perfect time to do so. Asking for and implementing fee reductions on today’s costs and locking in the rates—ideally for 12 to 36 months—will allow companies to avoid the impact of the potentially significant increases going into effect on January 1.  In many cases, reductions are retroactive to the first of the month negotiated, allowing you to immediately realize a benefit.  But it’s important to make requests before prices increase to maximize the full savings potential. 

While there’s an urgency to act now, it’s also important to be proactive and strategic about requests and negotiations, targeting those fees that will have the greatest impact on your company’s bottom line. To fully understand the savings opportunity, it helps to have comparative and real-time benchmarking data to assess the best-in-class prices for different line items and services.

• Be diligent about validating the savings and managing the credits.

Rate and Treasury fee negotiations are only truly successful if they are implemented and maintained. This requires careful monthly reviews and regular statement audits to validate that the agreed-upon pricing is honored and to ensure that fees aren’t increasing during the rate lock period. It’s also important to remember that earnings credits do not carry over each month. So, you need to be particularly diligent about excess balances and the opportunities it presents. 

The effort can be significant, but it is well worth it. Companies that take a more proactive approach to managing their fees and credits often report that their overall banking relationships become more engaged, open, and thoughtful as a result.

Higher bank fees don’t have to be a given on January 1, 2024.

If you are receiving notices about increasing bank fees and are concerned about the impact on your business, remember that there is still time to significantly influence what you will ultimately pay and how much value you can derive from your assets. But that window is closing fast.

If you’re interested in learning more about how to take a proactive approach to optimizing your banking fees, give SIB a call. We can help you secure best-in-class pricing, take advantage of higher interest rates on excess balances, and create a competitive advantage to set you up for a more profitable new year.