Free checking might appear to be an endangered species, but experts doubt it will disappear.
You'll just have to shop harder to find it or adjust your banking habits to keep it in the future, they say.
Bank of America this week unveiled a revamped checking lineup that comes with new strings — and in some cases new fees — attached. Other big banks recently ratcheted up their fees on some accounts, too, or put up new hurdles to keep accounts free.
More changes are sure to come. The bottom line, experts say, is you’ll either pay up or be forced to do more for your bank to keep checking free.
“For consumers that are proactive about avoiding fees there are still plenty of options,” said Greg McBride, senior financial analyst with Bankrate.com.
About 65 percent of banks currently provide some form of free checking, and about 23 percent offer customers free checking in exchange for things like using direct deposit or keeping a certain amount of cash in an account, McBride said.
New regulations will require banks to spell out account terms more clearly, and McBride said alert consumers can probably find an account that fits their needs while dodging pesky fees.
“If [consumers] don’t like these offerings there are other choices in the marketplace,” such as community banks and credit unions, said Jennifer Tescher, president and CEO of Center for Financial Services Innovation.
Many small-to mid-size banks haven’t announced account changes yet, and will likely wait to see what happens with BofA’s plans, said Ed Sibbald, a former banker and director of the Center for Financial Excellence at Georgia Southern University.
Recent federal regulation capped overdraft fees and certain levies on credit cards, and the Federal Reserve has proposed rules to limit what banks charge merchants to process debit purchases.
Banks also aren’t earning what they did on loans during the booming economy, and bankers say they provide services that have value, and they have shareholder profit demands to answer.
The revamp by Bank of America, the nation's biggest retail bank and third-largest by market share in metro Atlanta, is expected to drive the industry trend.
Wells Fargo, No. 2 in metro Atlanta, recently made some changes to account fees or raised hurdles on certain accounts to keep checking free.
Atlanta-based SunTrust Banks, No. 1 in the metro area, hasn’t announced any changes. But a spokesman said the bank is “constantly looking at our product suite to ensure our offerings are meeting the needs of our clients and are competitive.”
BofA plans to test its new offerings on new customers in Georgia and two other states before a national rollout for all customers starting later this year.
Fees will range from $9 to potentially $25 per month -- about $110 to $300 per year -- on the four new accounts. On the most basic bank account, customers will have to pony up about $9 per month, with no exceptions.
But on the other accounts, fees can be avoided if customers use packages of certain bank services, such as online banking, a BofA credit card, or having a mortgage with the banking giant.
Bank of America officials said the more clients bank with them, the more they get for free.
Luke Flatt, president and CEO of AB&T National Bank in Albany, said as regulation and competition has cut fee income, “customers of banks of all sizes should expect changes to the structure and pricing of their accounts.”
The concept of “free checking” is relatively new and was a perk to help banks win customer deposits they could then dole back out in loans. Overdraft charges on a small portion of customers largely subsidized it.
TCF Bank in Minnesota, which started the concept of free checking in the late 1980s, got out of pure free checking, because of regulatory restraints that made it too costly, said Sibbald, the Georgia Southern professor.
“The people who chronically overdraft will be saved those costs, but the revenue once (generated) by them will be paid by people who handle their accounts properly,” he said.
Bank services — checks, electronic payments, account security — aren’t free for banks to provide, noted David Oliver, a spokesman for the Georgia Bankers Association.
Higher fees at retail banks could be a marketing opportunity for credit unions, which often do not charge for checking accounts. However, they too could soon be pinched by proposed caps on fees institutions charge merchants for debit purchases.
“Anxieties are very high about how to deal with [new regulations],” said Mike Mercer, president and CEO of Georgia Credit Union Affiliates.
Stephen LaBar, owner of The Martial Arts Store in Duluth, said banks still aren’t opening enough credit to small businesses, and new checking fees add insult to injury.
LaBar said he’s gotten notices from Chase, who banks his company, that fees will be going up for small business checking accounts, too. Chase entered Atlanta when it acquired Washington Mutual in 2008
“If they want to keep me as a loyal customer, they’ll need to bend with me a little bit,” he said. “I’m not happy about being warned that [new] fees are going to come.”
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