RIP: Saying Goodbye to Free Checking

Are we about to see the end of free checking? There are indications that free checking may be on the way out. With overdraft fees capped in the U.S. by a recent bit of financial reform legislation, banks are looking for ways to keep the revenue coming in. One of those ways to take free checking accounts and start adding fees. Last year, one of my banks accounts announced $9 monthly fee on my checking account if I didn’t maintain a certain balance. Since I had only opened the account because it was required to get a high yield savings account, I pulled all my money out and closed both accounts.

My experience isn’t abnormal, though. The New York Times cites a study from Bankrate.com that found that the number of free checking accounts without minimum balances or service fees has been declining. Not only that, but the required minimum is rising, according to the survey information cited by the New York Times:

In addition, according to the study, minimum required average balances and monthly service fees for noninterest accounts are up from last year. According to Bankrate.com, the minimum average balance required to avoid monthly fees for a noninterest checking account is now $249.50, up from $185.75 in last year’s survey and $109.26 in 2008.

This is for a noninterest checking account. Banks aren’t even paying you interest, and still charging fees in some cases. Other banks, like Bank of America, are testing out tiered accounts that would provide you with a chance to avoid fees by maintaining a certain account balance or engaging in a certain number of transactions. Accounts with no minimum balance and no transaction requirements, like what we have now in free checking, would come with monthly service fees.

What You Can Do to Continue to Receive Free Checking

Most free checking accounts are still truly free, even though a disturbing trend seems to be forming. If you want to continue to receive free checking, and you don’t want to have to worry about maintaining a minimum balance or counting the transactions you make each month, you do have some options:

• Go Online: Many online banks still offer truly free checking accounts. Additionally, some major banks offer online bank accounts that come without paper statements. However, you may have to pay a fee if you come to the branch to bank with a teller more than a couple times a month.
• Bank Local: Instead of relying on a big national bank, you can consider your local bank or credit union. Many of these financial institutions offer free checking accounts — no strings attached. Check to see what sort of ATM or bank coop the local institution belongs to if you are concerned about access your account while on the road.
• Special Accounts: Student checking accounts and senior checking accounts still have special features that usually mean truly free checking. As long as you meet the eligibility requirements, you should be in reasonably good shape.

You can show your displeasure with the new state of things. If you aren’t happy with what your current bank is offering, there is a good chance you can find something better elsewhere.