Growing up in the 2000s, I, like most of my peers, have come to take free checking accounts for granted. In fact, when a big brick & mortar bank started instituting monthly fees on my checking account a few months ago, I closed that account and turned all of my checking business to a bank that didn’t have any monthly fees for their accounts.
But free checking can become “endangered animals,” says a New York Times article:
The biggest impact on checking accounts, however, is likely to come from new regulations governing overdraft protection. Starting in July, banks will need explicit permission from customers before allowing them to use their debit cards to spend more than they have in their bank accounts on a one-time purchase. Similar restrictions will apply to A.T.M. withdrawals.
Banks earn billions in overdraft fees, money that helps pay for free checking.
20 years ago, most checking accounts had fees or very high minimum balance requirements for a free account. Washington Mutual brought free checking to the masses in 1990s and subsidized the free checking by selling more profitable loans and services. Other banks followed suit.
The article goes on to say, however, that debit cards (and the revenue from fees retailer pay to accept the debit cards) might be enough to pick up the slack from the overdraft fees, so banks can still maintain free checking for most of their customers. Personally, I am becoming more and more interested in debit cards, especially if I can’t have a free checking account without using debit cards.
As a consumer, I definitely hope free checking is here to stay.
My two questions:
1. If you had to choose between free checking with deep overdraft charges, or low monthly fee (less than $10) but with overdraft protection, which would you choose?
2. What can banks do to keep your business even if they don’t have free checking? (i.e. identify monitoring services? better customer service? other perks?)
Related posts:
1. I would chose free, I don't use debit.
2. I would search for someplace new if they didn't have free checking.
1. Free checking with deep overdraft charges. People just need to be responsible and know that they can't spend more than what they have in their accounts. I don't want to pay a monthly fee for some stupid overdraft protection. I think that should be an option…to add it on for whatever amount the bank wishes to charge.
2. Hmmm this is a tough one. How about allowing me to use my debit card abroad without charging me a fee. Or allowing me to make transfers to other banks without charging a fee.
I'm starting to think that more banks should increase the minimum balance one can have in their account from $0 to $100 or something like that, and once it falls below $100, to charge a fee. Otherwise, keep it free. When I wanted to open a bank account in Singapore, some banks had a $1,000 minimum balance requirement.
The minimum balance requirement seems fair.. $1,000 seems really steep but I think $100 is definitely reasonable. I have overdraft protection right now – but it's not a monthly fee – wouldn't have signed up if it is. If I overdraw my checking, I'll be hit with a $10 fee per overdraft infraction, which I think is fair.
I would definitely use the free checking without overdraft protection. I'm on a cash-only system, and if I'm dumb enough to overdraw on my account, I deserve the fees.
If my bank began charging for my checking, I would definitely leave the bank. I don't think there's anything they could do to keep my business, and I expect excellent customer service as it is. Actually, maybe if my bank stopped taking pending transactions out of my account before they post… Maybe that would keep me. :-p
1. Low monthly fee and I would make sure that I put extra money in to make sure not to overdraft and also monitor it online.
2. Money management tools online, credit monitoring, virtual wallet applications, free financial check-ups etc…
I have a free checking account that I opened when I started college but most of my heavy lifting is done in my paid for checking account with a credit union. They charge a $1 for my checking account. Not bad at all.
If the time comes for me to look for another checking account I'll definitely check out credit unions. I've heard a lot of good things about them. How did you select which credit union to use?
You have to qualify to become a member or someone in your family needs to be a member for you to open up an account. So I didn't do any "choosing." I attended a public unversity for undergrad and I worked for them. This made me a state employee and I joined the state employees credit union the state offered.
You guys are lucky, free checking is pretty rare here. My bank did introduce a fee free account a while ago though, provided you stop getting paper statements in the mail.
I still have a student account with no fees, but I pay $2 a month for overdraft protection. I wouldn't mind paying up to maybe $5 a month in fees, but I guess I'd rather have a free account and just start keeping a cushion in my account.
For me, online banking is a biggie. My bank MUST have a good online banking system! None of the other four I've ever used come close.
What I would like is no fees on my credit card. I'm going to try the closing bluff sometime and see if they'll cancel the fee.
Free checking all the way!!! I just closed out my Citibank checking account which I had for a bunch of years cause starting this month they were charging a monthly account fee. I opened a checking account at Bank of America for free online and cant be happier!
1. Free checking
2. I will find a bank that will give me free checking. I am not going to pay a bank to hold my money. And, nowadays, I can just use an online account for free. I don't write many checks anyway and I could probably figure out how to live without.
The majority of my banking is done online, but.. those checks still come in handy often – paying rent, for example.
I would definitely do free checking with overdraft charges. (Luckily, I always know my bank account balance, so I have never and hope to never overdraw my account!)
I'm part of the WaMu/Chase bank now, and for the moment still have free checking – but, I might look into a local credit union if I suddenly found myself without free checking!
1. free checking or low monthly fee. since I constantly monitor my checking account (at least once a week), I don't see myself having any problem with regards to overdraft fees.
2. no fee at all, without terms and conditions – like have to maintain certain balance, have to have direct deposit, have to pay bills using debit card -UGH!
1.) I would choose the free checking with overdraft fees. I’ve never bounced a check and most like never will…
2.) Hmmm, I’m not sure. I like the idea of free checking… If the brokerages aren’t hit with the new regulation, I might go with Schwab’s offer or something comparable that has free checking.
.-= Don@MoneyReasons´s last blog ..Stop Waiting For Magical Moments To Happen =-.
I've had a few instances where I accidentally overdrew, but I've had pretty good experience in asking the bank to waive the overdraft fee because I have a good history with them. Still, I signed up for an overdraft protection service linking my savings account to my checking account if I overdraw – that fee is $10 per overdraft occurrence, as opposed to $35 overdraft fee.
Free checking with deep overdraft charges. No question. I see no point in paying a bank to remind me to balance my checkbook.
It's possible (possible) that I might stay with my bank if they started charging for checking. I'm with them because they're open in the evenings and on weekends (even Sundays) and I find that convenient. But in reality, I'd probably jump to another bank with free checking and suck up the inconvenience.
In Canada there is only one bank that I know of that has free chequing accounts…. they really just don't exist here
Really? That's something new I learned today. Thanks!
Lots of banks aside from PC Financial offer free chequing, but you have to keep a minimum of $1000 in the bank to qualify for the free chequing, but it also varies by the plan. My preference is for the unlimited plans, but the 1K balances are normally for under 15 transactions/month. If your balance drops below that during the month, you'll get charged.
It depends on the bank. CIBC, BMO, & TD are all 1K; Scotia is 1.5K
RBC is free or discounted, assuming you hold a savings/investment account plus a mortgage with them, which I think is ridiculous.
1. I would rather have free checking at this point in life, with a notification of low balance sent to my email or as an automated call or text to my cell phone. I haven't had an issue woth deep overdraft fees since I was in college and kept a low balance in general. One time, the amount of my paycheck from my part-time job was removed without notification. It was the other bank's fault, but Bank of America slammed me because I made a couple small purchases (a movie, trip to CVS, pizza) without knowing my account had been depleted. It was incredibly stupid – $35 for each purchase and they wouldn't remove the fees even after I argued with customer service. How was I to know I had no money without the benefit of a call or email? My employer graciously paid the fees, but it was both banks' fault and not his or mine. Silly!
2. I would not be opposed to paying a low fee for a checking account if ATM withdrawals were free, or overdraft from savings was automatically included (it isn't with Bank of America).
I think I need a new bank in general! If you don't mind my asking, which bank do you use, Miss WellHeeled? You seem very pleased with them.
Good question. I don't write many physical checks but of course use my checking account for electronic bill paying.
I would want to continue to have free checking with deep overdraft charges. Although I have been overdrawn in the past, it's been many years. If the penalty was severe enough, hopefully it would change the behavior.
I would want free access to all ATMs. I think the fee the banks charge is outrageous!
I usually don't get ATM fees because I withdraw money from my bank's ATMs. But once I just couldn't fathom walking an extra 4 blocks in heels, so I swallowed the $3 charge. At least I withdrew $100 so I can console myself by saying it was "only" 3%.
I would choose the free checking.
If I was being charged i would want very good service, online banking that is robust, free bill pay, identity theft protection.