Big Banks Are Eliminating Free Checking Accounts

A while ago, we talked about how free checking may be ending as banks, big and small, adjust their business models after regulatory changes in recent years. The new laws, which essentially changed how banks issue credit cards and collect overdraft fees, are supposed to protect consumers from banks’ predatory practices, but it seems that the new rules have also forced consumers to pay a higher price for using some common banking products, such as checking accounts, if they can’t meet certain requirements.

TCF Financial Corp, the Wayzata, MN based bank which pioneered the totally free checking account more than two decades ago, started to charge $9.95/month maintenance fee for its checking account last year if the account holder can’t make at least $500 direct deposit into the account every month or maintain a daily balance of $2,500 or more. Such dramatic changes came after the bank saw more than 30% drop of quarterly profit early last year. Of course, in the case of TCF, the impact is rather small because of the size of the bank and the number of customers it serves. When we talk about some of the largest banks in the country, however, many, many more people will feel the pain. For example, Bank of America, the nation’s largest bank by assets, introduced its version of fee-based checking account, MyAccess Checking, last October. MyAccess Checking Account requires the account holder set up monthly direct deposit or face $8.95 monthly fee. Though required, there was no specification on how much direct deposit a BofA customer has to made per month in order to obtain the fee waiver, meaning that you can just direct deposit $1 per month and forget about the fee. Compared to what TCF did for its checking account, this doesn’t seem to be too bad at all.

Free checking

The bad news is Bank of America isn’t done yet, as well as many big banks. Starting May 24th, BofA will have similar requirements for its MyAccess Checking Account as TCF does. For BofA MyAccess  customers, to avoid the monthly fee, which will also be increased to $12, they will need to

  • Have at least one qualifying direct deposit of $250 or more made to your account each statement cycle, or
  • Maintain an average daily balance of $1,500 or more in your account.

Unlike other banks with the direct deposit requirement, BofA also has requirement on the amount of a single deposit, specifically asking for at least one direct deposit of $250 or more, which means that you will still be charged the monthly fee even if you make two DD with $125 each.

And BofA isn’t the only big bank that start to impose daily account balance or require direct deposit in exchange for a fee waiver. Beginning May 15th, US Bank will rename its checking account to Easy Checking Account and as the name change implies, there will be no free checking for Easy Checking Account owners unless they maintain a minimum account balance of $1,500 or make $500 combined direct deposit every month. Next month, BB&T Bank will also replace its free checking with a new account called Bright Banking. As part of the change, account owners will be assessed a $10 monthly fee if they can meet either the monthly DD (no specific amount) or combined monthly account balance  ($1,500) requirement.

Among the changes at banks mentioned above, I think this new requirement is stricter than what other banks require, therefore, those who can only make small DDs will probably get hit with the $12 monthly fee. If you don’t like these new requirements imposed by big banks, what are your choices? Many have recommended small community banks or local credit unions as replacements for big banks because these small banks or credit unions are less driven by profits than the big banks are. Another option is online banks which, in addition to savings and money market accounts, also offer free checking, some even with interests. One example of such bank is Ally Bank. Ally Bank Interest Checking Account not only is fee-free, but also pays you interests for the money you have in the account. It will give you a free debit card that you can use to withdraw cash from an ATM, any ATM, for free because Ally Bank reimburse fees charged by other banks for using their ATMs. Not a bad choice for free checking account.

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