How to Keep Free Checking

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In the not-too-distant future, free checking will be a thing of the past. Well, maybe.

A story in The Wall Street Journal has caused quite a stir saying many banks are likely to cancel free checking to make up revenues lost from new regulations, like those curbing overdraft fees for checking accounts and credit cards.

So, what should you do if your bank will start charging for a simple checking account? Do you just have to live with it?

First, let’s not assume the demise of free checking is a done deal. Banks always say new restrictions will raise costs for customers. Despite the crocodile tears, it doesn’t always happen.

One reason is good old competition. Some banks are sure to figure that free checking is a good way to steal customers from banks that are starting to charge for it. Free checking is also a tool for establishing a relationship with a customer who may later use more profitable products like credit cards, mortgages and brokerage services.

But let’s assume your bank does eliminate its most basic no-strings-attached free checking account. What should you do?

First, see if the bank will continue providing free checking with a few painless requirements.

For example, you might get free checking if you have your paycheck automatically deposited in your account. This is a convenient service that allows you to avoid a weekly rush to the bank before paying bills. With direct deposit, you might have quicker access to your salary, and you won’t have to worry about getting paid in advance or missing paychecks when you go on vacation.

Or the bank may offer free checking if you keep a minimum amount in the account. This could be relatively painless if, for example, you have a rainy-day fund earning almost nothing in a money-market or other low-interest account.

The key is to be disciplined enough to stay above the minimum so you don’t trigger a charge. These days, many banks have free alert services that will text or e-mail the customer when an account falls below a set level.

Your bank may also waive checking fees if you have a debit card linked to the account. Although you won’t be charged for the card, the bank will receive a fee from the merchant every time you use it. Debit cards are a good tool, offering the convenience of a credit card without annual fees or interest charges. Again, the key is to keep on top of your account balance.

Other requirements could be onerous — so bad it would be worth looking for another bank. If the price of free checking is opening a savings account that pays almost nothing, setting up a brokerage account you don’t need, or investing in the bank’s in-house mutual funds, the cost may be too high. It certainly wouldn’t make sense to take out a mortgage or car loan if the terms weren’t the best you could find in the market, even if free checking was attached.

With electronic banking and bill paying, there’s really no need to deal with a local bank, and you can use the BankingMyWay Search Tool to find the best deal. Keep in mind that there is one benefit to banking with a firm that has a big local presence — plenty of ATMs.

Finally, check with your brokerage or mutual fund company. Many have free check-writing services linked to money market funds. Some will even reimburse ATM fees charged when you use another firm’s machine.

—For the best rates on loans, bank accounts and credit cards, enter your ZIP code at BankingMyWay.com.

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