Sunday, October 14, 2012

Is Free Checking Really Free

Banks are increasing ATM fees at an astronomical rate and are reducing or eliminating free checking accounts. stated ATM surcharges for non-bank ATMs – fee charged by a bank outside of your network, increased up 4% for the eight straight year and is now $2.50. The fee your bank charges to use another bank's ATM increased 11% to 1.57. The cost to use an ATM that is outside of your network can be as high as $5 per ATM use.   One out-of-network ATM transaction per month is $60 per year.

Banks provide ATMs for free to their customers and cover those costs by charging consumers who use out of network machines.  However, consumers are getting wiser and have reduced usage of out-of-network ATMs so banks are trying to make up for lost revenue.  Three of the biggest banks:  Wells Fargo, Bank of America and Citigroup lost a combined 1.5% of deposits last year because of customers switching banks.

According to only 39% of non-interest checking accounts are free of charge to all customers.  The banking industry has lost income due to regulation changes such as limits on overdraft fees and a reduction in debit card swipe fees.  As a result banks have reduced the number of free checking accounts available to consumers. 

According to Greg McBride, senior financial analyst for, swipe fees and overdraft fees helped underwrite the costs of free checking before the regulations were imposed. Banks now only provide free checking accounts to preferred customers who have direct deposit accounts or a specific minimum balance.  

Wells Fargo has been phasing out its free checking over the past two years.  Wells Fargo stopped providing free checking accounts in August 2012 for customers in Virginia and Maryland, Washington, D.C, Florida, North Carolina and South Carolina. They now charge a monthly fee for checking accounts plus a fee for online or paper statements.  Preferred customers who maintain a daily minimum balance of $1,500 or with direct deposits of at least $500 per month can avoid paying these fees.  Some banks such as Bank of America charge an extra NSF fee if overdrafts are not repaid within a certain timeframe.

The best online checking accounts as of this article are: ING Direct, EverBank offers, Charles Schwab and FNBO Direct that do not require a minimum balance to open or to avoid fees.  Here are 9 tips for save money on bank checking account fees.

  1. Compare.  If you write a lot of checks shop around. Some banks charge $24 or more for a box of 200 checks.  You can get the same amount for as low $10 by ordering directly from the printer or with an online company.
  2. Get overdraft protection. Verify the terms and conditions of the overdraft protection including that you get at 30 days to repay the overdraft.
  3. Ask for discounts or about specials.  Periodically check with your bank to see if there are discounts, specials or better terms available.  If you have been a customer at least 2 years remind the company of your loyalty.
  4. Get cash back.  To avoid ATM surcharges get cash back when make a purchase with your debit card.
  5. Invest in your bank.  Ask about offers for shareholders.  If your bank offers them purchase at least one share to get the special deals and discounts. 
  6. Limit interactions.  Limit in-person bank transactions and ATM visits.  Some banks offer no-fee checking accounts if you do all your banking via ATMs. If you must visit a teller, make sure it's for a transaction that you couldn't perform at an ATM; otherwise you'll be charged a fee. Some bank may offer low-fee checking if you have 10 or fewer transactions a month, including checks, debit card purchases and ATM withdrawals,.
  7. What is “free”. Find out what “free” means.  Most banks offer free checking if you maintain a balance of at least $500 to $2,500 in a low or no-interest account.
  8. Link your accounts.  Avoid hidden fees by linking other accounts.  Link a CD to a checking account or link a savings account to a checking account to satisfy the minimum balance requirement.  This only works if your bank treats the money in all your accounts as one combined balance.
  9. Read the fine print.  Read the financial disclosure provided when you opened your checking account and periodically check the banks’ website for any updates or changes to the terms and conditions for your account.

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