Farewell to “Free” Checking Accounts?
A three-year slide in the number of banks offering free checking is putting this classic account on the path to potential extinction. Will the “free” in checking soon be on an endangered list? Research suggests it could happen.
Once a core “have-to-have” bank offering to new customers and their deposits, free checking now is only offered at 39% of banks in the U.S., down from a peak in 2009 when 76% of banks offered free checking or DDA accounts, according to studies by BankRate.com. That fact garnered a recent headline in The Financial Brand, “Free Checking Steps Closer To The Graveyard.”
Free checking is so named because such an account has no minimum balance and no monthly fee. However, as the BankRate.com research painfully shows, even when one can find a free checking account, it has, in many cases, transformed into a “fee” checking account.
In turn, when it comes to fees, almost every checking account fee is showing steep increases. The Bankrate.com research cites the average monthly maintenance fee for a noninterest-bearing checking account rose to a record high $5.48, an increase of 25% over last year.
In addition, The Financial Brand also cites these other checking-account changes: minimum account balances required to avoid fees are going up; minimum amounts to open a checking account are on the rise; and overdraft fees continue to creep up as banks make up ground for regulatory changes, which have eaten into previously lucrative fee-income streams.
It may come as no surprise that 72% of Americans said they would consider switching banks if their financial institution raised its fees on checking accounts, up from 64% in March 2011, according to a MoneyRates.com study.
To be sure, banks still offering free checking no doubt will ratchet up the marketing volume and font size on the word “free” in their checking services to capture fee-weary consumers.
However, as the trending suggests, free checking may not be dead yet, but this classic offering could soon be placed on an endangered list, right up there with writing checks and giving away free toasters.