Smaller banks will no longer offer free checking accounts

A few regional banks as well as community banks had started offering free checking accounts in the last few months in a bid to attract customers from the major banks. However, all these efforts to win customers by offering freebies could be short lived due to the regulations and the related costs that would become a reality by the year end.

Stephen Steinour, CEO, Huntington Bancshares stated in an interview with ‘The Street’ that they were positioning themselves to be the more ‘customer friendly bank’ in the Midwest and they also hoped to grow by roping in more customers and offering the existing customers good services. He also stated that the new ‘Asterix Free’ checking accounts was a response to the concerns that customers had with regard to the checking account fees that were to be implemented by major banks.

Most major banks have added the fees on checking accounts while eliminating some of the customer rewards programs, and have ended complimentary overdraft programs due to an increase in regulatory expenses after the Dodd Frank Financial Reform Act.

Some fees have also been gradually introduced by the large banks in the past year, on checking accounts to prepare for expenses of The Durbin Amendment that will put a cap on the interchange fees that the retailers pay the banks on all debit card transactions. This July, the amendment would be finalized by the regulators and it would cost the banking industry anywhere between $13 to $15 billion according to William Cooper, CEO, TCF Financial.

TCF has also stated that it would have to put an end to its free checking due to the expenses that is likely to arise due to the regulations. TCF had offered free checking for about two decades.

Most of these small banks were holdouts for free checking and hope to gain from the customers from the larger banks. Jones Day from Chip MacDonald has stated that these banks were waiting to bring about these changes in pricing on all their products. TCF also is a leader of sorts for these community banks. However, he maintains that even these banks will have to charge at least on some of the services they offer such as the minimum balance, monthly, maintenance fees, ATM fees, or paper statements.

CEO at HF Financial, Curtis Hague also is of the opinion that sooner or later these community banks will have to charge fees as the free checking accounts are on their way out.