Free checking, at least at the mega banks, seems to be gasping for its last breath of air. Banks are having to make adjustments to their revenue streams, which have been hit hard by the Credit CARD (Card Accountability, Responsibility and Disclosure) Act of 2009. As of July 1, 2010, banks were required to get customers to opt in for overdraft protection. If you don’t opt in, rather than the bank covering it and charging you a fee, your debit card will now simply be declined. This was a win for consumers overall, but it will indirectly result in other fees springing up. The Washington Post reported that Wells Fargo expects to lose $500 million in revenue each year from the changes related just to overdraft fees. Banks aren’t going to take this lying down. You can bet that the fees will disappear in regulated areas, and pop-up in other forms.
One of the ways in which banks appear ready to make back some of their lost revenue is by charging for what many have come to expect for free: checking. The disappearance of free charging, mostly among mega banks, is here. I closed my dormant Citibank account a few months ago when I noticed it had started charging me fees. They got about $60 out of me before I ever even realized I was being charged fees. That’s what having too many accounts and not using Mint.com will do to you. I also closed my Wells Fargo account this weekend. Shortly after opening the account they had started to charge me $20/mo. I switched accounts to reduce that down to $5/mo, but finally decided I was having none of it. So here’s my ultimatum: Any bank that starts charging me a monthly fee that isn’t easily waived without me doing any work, I will cancel my account and take my money elsewhere.
Let’s take a brief look at the mega banks and the fees they’re now imposing:
When I was closing my Wells Fargo account, the banker notified me that I could avoid the $5/mo fee by simply switching over the Free Checking. I was thinking to myself: “wow, I could have sworn that they were no longer offering free checking.” Of course, they were offering “free checking” as long as you get the fees waived. I think that advertising “Free Checking” on billboards is deceiving enough, but to give me the same line to my face is even worse in my book. Wells Fargo has what they call Value Checking, which will run you $5/mo and doesn’t include free BillPay. A real checking account will cost you $10/mo. This fee can be waived with a monthly direct deposit or a $1,500 average balance.
Bank of America
I currently have a CampusEdge student checking account with BoA. Luckily, the account is fee-free for five years. However, at the end of those five years, the account automatically switches over to a normal checking account, which charges monthly fees. Bank of America seems to have two major options for those looking for standard checking. Each charges a $8.95 fee, which can be waived by fulfilling requirements. The eBanking Bank of America account seems to be the easier to waive. All you have to do it restrict your banking activity to the electronic variety (online or ATMs) and get your statements delivered paperlessly. Seems easy enough, as that’s how I prefer to do my banking anyways. If this seems to fit your banking habits, this is likely the account for you. Bank of America’s MyAccess checking doesn’t have too strict of requirements. To waive the $8.95 fee you need to either make a direct deposit to the account each month, or maintain and average balance of at least $1,500. If this is your main account, the direct deposit should be easy to do through your employer. You could also just set up a monthly direct deposit from another account you have to waive the fee.
Chase seems to be the most extreme in its fees. Its $6/mo fee on its normal checking isn’t bad and can be waived with 5+ debit card purchases during the month, or a direct deposit of $500+. However, Chase has chosen to even charge college students and even high school checking accounts this $6/mo fee. I have chosen to keep my bank account at Chase because I have my paycheck deposited there, which waives my fee. After having accounts at most of the big banks I decided on going with Chase. I’ll have to write a banking round-up soon covering my experiences with the different banks.
Note: Chase will actually be increasing its fees in February 2011. It will be moving existing customers to a Total Checking account. All customers currently using Chase Free Extra Checking, Chase Free Classic Checking, and Chase Basic Checking will be moved over. The Total Checking will cost $12/mo for most people, $10/mo for those in California, Oregon or Washington. A number of other Chase fees will be increasing, so make sure you know how this will affect you.
Citibank seems to be taking a bucket approach to getting fees waived. The basic checking will cost you $8/mo unless you perform five of the following activities during the month: direct deposit, debit card purchase, bill payment, check paid, or ATM withdrawals. I call it the bucket approach because they pretty much accept any activities to fill up your five activity minimum bucket. This seems like a good approach, but unless it’s your main account, it is a complete pain. I don’t want to have to artificially created five transactions just to get my free checking.
As you can see, the mega banks have all come to an implicit agreement that customers should have to pay for the privilege of banking with them and receiving a low interest rate on their money. Most people will be able to get the fees on their main account waived simply through normal transactions. If you keep multiple bank accounts, like I do, then you’ll really need to look at each one to make sure you won’t be assessed fees. It’s surprising to me that no mainstream bank seems to be bucking the trend. I’d think that if any of the mega banks were to continue to offer free checking and really emphasize that, they could increase their customer holdings quite significantly.
Local banks, however, are luckily not following suit. To maintain my multiple accounts, I may need to pursue local banks more. I have one local bank which I’ve used for approximately 10 years (since I was 12). They’re not in the city I am now though, which makes it very difficult to use them. Mainstream banks also have a lot of benefits that I take advantage of, like mobile banking and large ATM networks. Some of these benefits can be had with an online banking account like Ally.
I think that everyone just needs to be aware of the fees that they are being charged, or will be charged, and assess whether they can get the same or better service without the fee. If there’s a banking product you need, or there is a definite convenience factor, than it may be worth paying the fee even if you can’t get it waived. Just make sure you’re making a conscious effort about where you bank and the fees you’ll be charged.