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Fewer banks offering free checking
Charges on accounts rise to recoup revenues lost to lower card-swipe fees
It's not so easy to find a free checking account these days.
The number of banks offering basic, no-strings-attached free checking accounts has plummeted in the past two years, according to a study released Monday, as banks scramble for new sources of revenues.
Consumers are being forced to either pay up or to appease banks in other ways to avoid these fees, such as maintaining a minimum balance or having a loan with the same bank.
"The decline of free checking is in full swing; however, savvy consumers can take advantage of an increasing amount of fee waivers, most commonly with direct deposit," said Greg McBride, senior financial analyst at Bankrate.com, which has been conducting this survey since 1998. "Ninety-two percent of non-interest accounts are either free or can become free."
Bankrate found that only 45 percent of standard, non-interest checking accounts are free, down from 65 percent last year and 76 percent two years ago. That means 60 percent more accounts now carry fees or balance requirements. In either case, neither would be considered free by definition, because there are strings attached in order to waive the fees.
The average monthly fee is $4.37, up considerably from last year's $2.49. While the balance required to avoid such fees is $585, more than twice as much as last year's $249.
Meanwhile, interest-bearing checking accounts have also seen a jump in fees. The average monthly charge is $14.15, up 8.5 percent from $13.04 last year. The balances required to avoid such fees jumped about 44 percent to $5,587, from $3,883 last year.
Richard Hunt, president of the Consumer Bankers Association, warned of this when Congress passed a bill to reduce swipe fees that merchants pay to banks when a consumer pays with a card. They have to make up the lost revenue somehow, he said, so they are looking at higher fees and even creating new ones.
"Each bank's going to have to do what they have to do to stay in business," he said. "The vast majority have no choice but to raise revenue through checking accounts."
"We yelled loud and clear that this would be one of the consequences," he added. "We showed everybody that we would have to increase checking-account fees and debit card fees. It was a mathematical certainty this would happen. So this comes as no surprise to anybody."
But consumer groups say smart shoppers can still find free checking accounts. They just need to turn their backs on big banks and look to credit unions and small, community banks, said Ed Mierzwinski, spokesman for U.S. PIRG.
"Bank at a credit union, not a bank," he suggested. "Consumers can still find free checking at small banks and credit unions. They might not find this at big banks. They have the biggest fees, they make it hardest to avoid fees, and they're inventing new fees."
The problem, he acknowledged, with shopping for smaller banks is that they are a "pain in the neck" to find, and they have fewer ATMs, whereas big banks have more accessible ATMs.
Checking fees aren't the only rates that has increased.
ATM surcharge fees also rose for the seventh consecutive year. They ticked up 3 percent to $2.40, from $2.33 last year. The District came in slightly below the national average at $2.39, and ranked 11th.
Overdraft fees, also known as non-sufficient funds fees, increased for the 13th consecutive year since the survey began. Consumers that bounce checks can now expect to pay $30.83, up 1 percent from last year's $30.47. In the District, consumers pay $29.64 for overdraft fees, also below the national average. The city ranks 19th.
Debit card fees, on the other hand, have yet to notice the same spike. Only 4 percent charge a fee at the point of sale, and less than 2 percent charge monthly or annual fees.
© Copyright 2014 The Washington Times, LLC. Click here for reprint permission.
About the Author
Tim Devaney is a national reporter who covers business and international trade for The Washington Times. Previously, he worked for the Detroit News, Grand Rapids Press, Portland Press Herald and Bangor Daily News. Tim can be reached at email@example.com.
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