What the End of Free Checking Really Means For Consumers

This is a guest contribution from Bill Hazelton, CEO of Credit Card Assist where he provides tips, news and advice on credit cards, balance transfers, rewards programs and all things credit-related.

While it’s not yet officially the end of free checking, consumers are finding it harder and harder to find banks that will waive fees on checking accounts. San Francisco-based banking giant Wells Fargo eliminated free checking accounts on all new customers effective as of July 1, 2010. They did grandfather-in existing customers to continue to receive free checking services on those older accounts, but all new accounts no longer enjoy fee-free checking. Many other banks have followed suit, instituting monthly service fees and even charging customers for new checkbooks and raising rates for bounced and canceled checks.

As a customer, what do you do? Checking accounts still offer a great deal of convenience and are necessary for many people, yet rising fees and service charges can take a significant bite out of your budget.

The good news is that most banks still offer ways to back into a free checking account, usually in the form of waived fees, so long as certain conditions are met. While monthly checking account fees and the terms and conditions under which they can be waived vary from bank to bank, here are some of the strategies you may be able to use in order to avoid the bite of those service charges:

  • Maintain a minimum balance. Some financial institutions will waive checking fees if you keep a minimum balance in your account every month. However, you need to be sure you watch carefully if your balance approaches this limit, as you may get dinged if you dip below it before the date on which monthly fees and service charges are levied.
  • Purchase other financial products from the bank. In the case of Wells Fargo, the bank continued to offer free checking to customers who had a mortgage with their bank. You might also qualify for waived checking fees if you open investment accounts or purchase investment products from a particular bank.
  • Go for direct deposit. Because having your paychecks directly deposited into your checking account eliminates the need for you to queue up in the teller line (and cost the banks money paying those pesky bank tellers), some banks will not charge you monthly checking fees if you utilize direct deposit services. Talk to your employer about the possibility of going electronic with a direct deposit of your paycheck rather than cash a physical check each pay period.
  • Meet minimum monthly transactions targets. Some banks will cancel your checking account fees if you make a minimum number of monthly transactions, typically in the range of about 10 to 15 a month. Examples of transactions that would qualify include cash withdrawals, debit card payments for products or services, bill payments, credit card payments, deposits and so forth. However, you will want to be careful in this case, as some banks will charge you for each transaction beyond a prescribed upper limit.

You can also investigate alternative financial institutions as a means of cutting back on service charges and fees. Credit unions are specialized financial institutions that are both owned and controlled by its customers, also known to the institution as “members.” While you will have to qualify to join a credit union, many of them are location-based so might be able to qualify on the basis of being a resident of a particular municipality or county, for example. You’re likely to find that credit union interest rates are as low or lower than those offered by regular banks. In fact, you just might be able to get free checking as well as advantageous interest rates on major purchases like car loans and mortgages. Best of all, many credit unions do not require members to maintain minimum balances, directly deposit paychecks, meet a minimum number of monthly transactions or purchase other financial products in order to qualify for that free checking.

10 comments to What the End of Free Checking Really Means For Consumers

  • Terry Pratt

    My employer will NEVER go electronic because he depends on the weekend float he gets by releasing paychecks at 5:00 Friday afternoon.

    • Thanks for stopping by Terry.

      My last employer was like this and it sucked. Not only did they give us our checks after lunch on paydays, my check bounced a couple of times. I got to the point where I just left the building at 3:00 and went to the bank for 20 minutes. That way someone else’s check bounced, instead of mine. Thankfully, I quit that job and now work in a much more professional environment.
      Bret recently posted..The Stock Market makes a ComebackMy Profile

  • Another trick is to check if your bank offers a special plan for being a member of a professional order. Usually you get to save alot of fees on these plans.
    BeatingTheIndex recently posted..Gasoline ETF Tracks Gas Prices at The PumpMy Profile

    • I have heard of this at credit unions, but I wasn’t aware of this at big banks like Chase and WF. Maybe, they don’t promote these discounts at the branches.

      I would like to see someone like Walmart, Target or Costco partner up with a discount bank to take advantage of all their locations. It could be a great profit center to the right company, with a mix of online and retail presence. It could also work for someone like Starbucks, Subway or McDonalds.
      Bret recently posted..What the End of Free Checking Really Means For ConsumersMy Profile

  • Part of the argument over the forced reduction of debit card interchange fees was that it would cause an increase in fees required to offset the decreased revenue. Politicians and lobbyists for consumer groups and trade organizations, however, have argued that the decrease would cause lower prices at the register. This has failed to materialize so far, causing the shift of payments to the bank to be STRAIGHT from merchants to consumers.
    Cameron Daniels recently posted..Lottery WinningsMy Profile

    • Hi Cameron,

      My understanding was that the Dodd-Frank law reduced the debit interchange fees from 45 to 21 cents per transaction. The interchange is an obvious monopoly and the banks were gouging merchants, who in turn, had to recover the cost from consumers. Banks still make a great profit on interchange fees after the reduction. But, they aren’t making the $16 Billion they used to make and they aren’t happy about it.

      Banks used the argument that they would have to “recover” the lost fees from depositors. Bank of America tried a $5 monthly debit card fee, which failed. Now, some banks want to limit debit purchases to $50, which I predict will also fail.

      In my opinion, banks need to go back to earning money the old-fashioned way, by lending depositors money. I am very happy about the recent reforms and am glad banks are no longer allowed to fleece customers at will. They are dumping a lot of money into this election, so we will see how long the reforms last.
      Bret recently posted..Problems caused by Sudden WealthMy Profile

  • Excellent advice. I have never paid bank fees due to following most of your recommendations. Online banks and credit unions seem to offer the most no fee alternatives for banking.
    Barbara Friedberg recently posted..A DAY IN THE LIFE OF A TRADERMy Profile

    • I have banked with WF for the past 29 years. I remember paying a monthly fee for checking. After it became free, I had to pay a monthly fee for bill pay. Then, bill pay became free as well.

      I don’t mind paying a reasonable fee or carrying a reasonable balance for these services. I would much rather pay a monthly fee than get ripped off on re-ordered overdrafts.
      Bret recently posted..What the End of Free Checking Really Means For ConsumersMy Profile

  • Very useful insights, thanks for sharing. To tell the truth I’m not willing to pay a bank fee for checking, even a small one. I’ll definitely use your tips 🙂
    Nick recently posted..Backcountry Coupon Code and ReviewMy Profile