Survive the Demise of Free Checking


The fat lady is up on stage and she’s clearing her throat, signaling the end of one of banking’s classic institutions: free checking. While banks are already starting to place price tags on a host of once-free services, you have some options to keep your costs low – or free – so start saving!

Banks take a lot of abuse from consumer groups and the media, but in the case of free checking, you can see their point. After all, businesses are in business to make money, and government regulators have really tightened the screws on how much money banks can charge customers for things like overdrafts and late fees on credit cards.

"I've seen more regulation in last 30 months than in last 30 years," Robert Hammer, CEO of RK Hammer, a bank advisory firm, told the Associated Press. "The bottom line for banks is shifting enormously, swiftly and deeply, and they're not going to sit by twiddling their thumbs. They're going to change."

Consequently, banks are creating new ways to make up for lost revenue. For example, Bank of America (Stock Quote: BAC) will offer you “free” checking, but it’s going to cost $8.95 per month if you want conventional services like paper statements or to speak with a teller.

Other banks are dropping free checking too, according to industry watcher Moebs Services.

“This year, our study showed that 72.5% of the institutions surveyed offer free checking accounts to consumers vs. 83.5% that offered them a year ago. That’s an 11% decline year over year,” said Mike Moebs, economist and CEO of Moebs Services.

He points to the new financial regulations that went into effect this summer, the economy’s malaise and the general move away from free checking among Wall Street banks as reasons for the trend.

So, what can consumers do to avoid the added charges but still get the solid banking services they received with free checking?

•    Take the “direct” route. It costs more for banks to process paper checks than it does direct deposits, so many banks will waive monthly checking account charges if you set up direct deposit. A word of caution here: some banks, like Wells Fargo (Stock Quote: WFC) will charge you a fee if your direct deposit doesn’t meet a $250 minimum benchmark.

•    Debit your way out of extra fees. More and more banks are letting customers slide if they agree to make a minimum amount of debit transactions every month. Both JP Morgan Chase (Stock Quote: JPM) and Citi (Stock Quote: C) will waive checking account fees if you agree to make at least five debit card transactions each month. So the next time you pick up a gallon of milk and a loaf of bread, use your debit card and avoid those fees. 

•    Go online. Some bank customers may be leery about doing business with a “bank without walls”, but Internet banking is here to stay. One reason is that online banks like ING Direct offer “no strings attached” free checking accounts with no hidden stipulations that could result in monthly fees.

Free checking accounts are going the way of rotary phones and $2-per-gallon gasoline. Your job is to think of creative ways to still get free services from banks. Start with these tips.

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