Free checking accounts are almost extinct

The traditional no-fee checking accounts have been abandoned even by the biggest banks within the last year and account fees have been raised to record levels. There seems to be no respite from the new fees and customers are getting increasingly tired of the new fees that are being charged.

There was an offer from a bank to one of its customers where the customer was offered $100 for free for opening another checking account, some years ago. Everything was fine until a monthly maintenance fee began to appear last year which started eating into the balance in the account. The customer closed the account immediately.

When the customer started the account, there was no fee structure but when the rules as well as the fee structure started changing, the customer who is a retiree, decided to close the account.

The free checking account is almost extinct now, but at one point in time, it was the biggest attraction. Most big banks such as Wells Fargo, JP Morgan Chase, and Bank of America have decided to abandon the free checking account. Now these banks are on the lookout for other ways to earn revenue which is becoming increasingly difficult due to the federal reforms.

Greg McBride, a senior financial analyst working at Bankrate Inc., states that the banks that were the last ones to get onto the free-checking bandwagon are the first ones to get out now. But although the customers are tired of the fees they are not really switching banks as of now.

But around 65% of the ones polled by Bankrate have stated that they would consider switching banks if the fees got higher. Among the ones that earned over $75,000 annually 75% of them have indicated that they may be making a switch.

McBride has stated that this is a risk that these customers are willing to take. The ones that are most likely to make a switch are the ones from higher income groups. These are the same customers on whom the banking sector has spent tons of money trying to get attract these customers.

Banks however are blaming the new reforms and have added that these reforms have hiked up their expenses, eaten into their profits, and made the free checking accounts too costly and unaffordable. The previous year the government had imposed restrictions on the overdraft fee and the credit card fee revenue. Although banks don’t want to raise the fees on consumers, the regulations are forcing them to do so.