Have Free Banking Accounts Gone the Way of the Dinosaur?

free checkingThe following is a guest post.

It’s over. The days of free checking have gone the way of the free “check under your hood and wash your windshield” at the service station. It’s possible that many of you reading this are too young to remember the last time a gas station attendant did that.

Well, your children will probably never know “free checking”, or free checks, or free debit cards. The banks are in a battle to raise revenues and cut costs in the face of mounting pressures from new regulatory measures, designed to limit their ability to charge fees in other areas, such as overdraft fees and merchant swipe fees. And, it’s not just a frontal attack on our checking account. The banks are coming at us from all sides with new and nefarious ways to get into our wallet.

Although we saw it coming, the recent announcement by most of the major banks of their plans to institute or raise checking account fees was still a bit shocking, if only because it came so soon after the beat-down they took from the public over their proposed debit card fees. It’s clear by now that they will be relentless in their pursuit of revenue, even if it means driving all of their “free loader” customers away. Here’s more of what you can expect:

Checking Account Fees

Once offered as a means of attracting new customers, free checking accounts were always thought of as a given. With the vast majority of their customers free-riding on free checking accounts and not contributing to their revenues through other products or service, the banks have drawn the line. From now on we will see monthly service fees of $8 to $15 chipping away at our account balances. With most of the banks you can avoid this by maintaining a minimum checking balance of $1,500 to $2,500.

  • $3 Monthly Statements: If you want a physical copy of your monthly account statement, it will cost you – $2 to $3 per statement. You can avoid this fee if you agree to receive your statements online.
  • $15 Checks: If you want to write checks you will pay $10 to $15 for the privilege when your checks run out. You can avoid this by converting to online bill pay.
  • $5 for a Live Person: If you need to speak with a customer service rep on the phone, and in some cases, in person, it could cost you. You might be allowed two or three courtesy calls before the charges kick in.
  • Debit Card Fees: Don’t think the banks have given up on debit card fees, and you may very well see additional fee hikes for ATM usage.

Should You Stay or Should You Go?

Many banks have already indicated how you can avoid some of the nasty fees by just using more of their products and services. Here are just a few ways you can get in your bank’s good graces:

  • Open multiple accounts – add a savings account (with a minimum balance); open a low interest credit card account.
  • Open a brokerage account or IRA – banks make big money on securities transactions and money market fees.
  • Apply for a mortgage or car loan – their ultimate windfall.
  • Keep high minimum balances – they make money off the use of your money.

If you are one of the bank’s coveted high-net worth customers, you may not feel the pinch because you are the ones the banks want to keep. Your high checking, savings and CD balances alone will enable you to escape fees, and if you do any private banking, you’ll likely receive extra perks. For customers with more than $250,000 on account, there is generally no reason to leave your bank except, perhaps, on general principles.

Where to Turn?

Competition for your deposits is heating up in other parts of the banking world. You actually have several low cost alternatives that can enhance your overall banking experience.

Community Banks – They will literally bend over backwards to get your deposits, and, that alone would be worth the move. Fees are either non-existent or very reasonable across all of their products and services. Also, local banks are very willing to compete for your loan business by shaving interest rates, points and fees. Maybe it’s time to support your community bank.

Credit Unions – Because credit unions are owned by their members, not some distant shareholders, they are in business to optimize their member’s benefits. They’re generally non-profit organizations with any “profits” returned to their members in the form of lower fees, lower interest rates (or higher interest rates on savings). You will also find them much more accommodating in their lending practices.

Banking Online – If you don’t feel the need to kick the bricks of your banking institution, you can bank online through a number of well established e-banks, such as ING Direct. They offer all the banking product and services you need at little or no cost. Checking is free. Debit cards are free. Minimum balances requirements are low. On top of that, their rates on loans and savings are generally much more competitive than brick-and-mortar banks, largely because they don’t have to pay for bricks and mortar.

Prepaid Cards – It used to be that prepaid cards were used primarily for the unbanked or underbanked who couldn’t access banking services or avoided them. They also had a reputation for charging high fees. More recently some big players like American Express have entered the prepaid card arena and are providing people with a viable and reasonably priced banking alternative, at least in terms of check cashing and payment convenience. If your needs are limited to depositing a paycheck and paying bills and living expenses from your balance, a prepaid card could work for you. Just be sure to scour the fine print for any hidden fees.


Monica Clark is an editor and writer for DirectBanc.com, a credit card information website.

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17 thoughts on “Have Free Banking Accounts Gone the Way of the Dinosaur?

  1. I’m not sure if ING is more of a credit union or a bank but they offer free chequing. I think that, if we keep expressing our dissatisfaction with fees, and taking our business to the no-fee banks, banks will eventually have to eliminate chequing fees!
    Daisy recently posted..Lessons Learned in Growing a BlogMy Profile

    • In America, ING was sold to Capital One; not sure if they offer free checking. Hopefully the no-fee banks don’t dry up. I’ve been considering PerkStreet because they offer cash back on debit card purchases.

  2. I still get free checking, but that is because I have been with my bank for a long time and have multiple services with them. I did recently noticed that they increased everybody’s fees on various other services. If I keep using my account the way I am, hopefully I can keep getting it all for free. So in my case, loyalty is paying off.
    Modest Money recently posted..Starting A Side BusinessMy Profile

  3. I belong to a credit union, so everything is pretty much free. I’m in a banking class, and everyday we pretty much talk about how everything is eventually going to cost something. Banks don’t want the accounts that have a couple hundred in it because they are losing major money with these small accounts. It will be interesting to see how everything ends up.

  4. We bank with a local bank, and not only do we get free checking, but we also get paid a pretty high interest rate on both checking and savings. This, of course, is due to many of the factors you listed, like having multiple accounts/loans/services through them. I think it’s a deal worth taking, though!
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  5. This is the kind of stuff that pisses me off. Layers of new rules and regulations that make it so easy to mis-step and get screwed! Local banks though, I’ve never considered that before. Here’s a future post-idea for you — explaining community banks plusses and minuses, and how to tell if a bank is a community bank or not!

  6. I’ve had a free checking account for about 15 years with Washington Mutual before they were taken over by Chase. When I went into Chase after the takeover, the accounts manager encouraged me to hold onto the free account because it was grandfathered in. Of course some six months later I receive a service fee on that very account, the first time in 15 years mind you, without any warning or explanation. Sadly this is the way the banking industry is heading. If I could deal only in cash I would, but unfortunately with my business I need at least a business account. I guess it’s another +1 for big banks and another kick in the butt for us small businesses.

    • We used to get free toasters when we opened bank accounts, now we get charged. Maybe time to finally make the move to credit unions. I have US Bank which still offers free checking (but always there are strings attached).

      Thanks for reading, Mike!

      • In Chase’s defense, they do drop the monthly balance if I keep a minimum of $10,000 in the account, which by no means is a small chunk of change. Of course even with the monthly charges, that $10,000 would be way better utilized in some sort of investment instead of collecting maybe 0.5% interest annually from the bank.
        Mike@Investing in Silver recently posted..Austrian Silver PhilharmonicsMy Profile

  7. It was a poor recommendation to suggest opening an ING Direct to avoid bank fees. ING Direct is online only, and you need to link it to a CURRENT checking account in order to make use of it. This completely defeats the purpose!

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