Because of federal regulations, many banks have made some big changes in the last year.
One victim from the fallout over caps on debit card interchange fees and loss of revenue from overdraft charges is free checking.
According to the American Banker, since 2009 around two-thirds of all financial institutions have eliminated free checking. Instead, many banks have been adding fees or changing the terms on customers’ checking accounts.
But take heart…free checking and even reward checking accounts have not disappeared! Both are still around, and you might find them right around the corner in your hometown.
Free checking used to be subsidized by people who paid overdraft fees. But banks are worried those fees will dwindle now that consumers can opt-out of overdraft protection on debit card transactions.
Take a look at this chart from American Banker. It shows you just how far free checking has fallen over the past couple of years.
You’ll notice that back in 2009 almost every big bank in America offered free checking.
A whopping 96%!
Flash forward to 2011 and the number of major banks with a free checking option has plummeted to just over 1/3.
But that’s not the case with smaller banks and community credit unions. While a few have chosen to do away with free checking, the majority continue to offer it to customers. Bankers at smaller financial institutions and credit unions see free checking as a way to separate themselves from the big banks.
Some smaller banks think offering free checking has helped them steal customers away from their competition. But others say they continue to offer it because they don’t want to lose current customers.
“To tell our customers that we’re going to start to charge them when we have the free checking, we think that might be a big problem,” James Maloney, Chairman of Mitchell Bank in Milwaukee, Wisconsin told American Banker.
Some say that eventually – smaller banks and credit unions will start to struggle because of offering free checking. It costs money to maintain a checking account, and if people aren’t using others services at their bank like loans, debit cards, CDs etc. – then banks are losing money on those accounts.
So the future of free checking at smaller financial institutions might be somewhat up in the air. But for now, if you want to find free checking…the best place to find it is with the little guys.
According to BankRate.com, credit unions are also the best place to find checking accounts that actually have a high-yield or offer rewards.
Check out BankRate’s list breaking down the details of banks and credit unions that pay you interest for keeping funds in your checking account – 2011 High-Yield Checking Survey.
The take-away from all of this? It’s smart to shop around for the best place to keep your money! Chances are – there’s a better deal out there, and it’s probably nearby.
Has your bank eliminated free checking or added new fees in the wake of the Fed’s rule changes? Leave us a comment and tell us about it!
+Kasey Steinbrinck writes regularly on personal finances and the U.S. economy for Check Advantage. Visit them today and view their most popular checks including a big collection of Sports Checks and Flower Checks.