Financial reforms could now affect free checking accounts
After new regulations were announced in the form of the CARD Act of 2009, credit card companies and major banks have been fighting back in various ways. Card issuers have cut down the credit card limits and raised the APRs. With more reforms underway, banks are cutting down on standard features such as a free checking account.
Banks are doing their best to make up for the revenue loss that will happen when the overdraft protection fee comes into effect. Consumers had a lot more time to prepare when the new credit card rules went into effect. But this time around, they might witness sudden changes to the checking account options that they have. In fact, Wells Fargo will stop providing free checking accounts to new customers. New options for accounts are being explored by Bank of America and these might come into play later in this year. A lot of other banks are indeed expected to follow suit to compensate for the overdraft fee income that will be lost.
According to a recent report, more than 50% of checking accounts are not profitable even though it costs banks as much as 250 – 300 dollars to maintain them year after year. Banks have already been sent to the edge pushing them to make changes to make up for those revenue losses and implement new types of fees to replace the revenue from the overdraft fees. In fact even bank customers might face the heat with the level of requirements for an account without maintenance fee going up further. It may lead to a situation where customers are forced to take other routes like direct deposit to get a checking account for free. In fact, basic services like ATM withdrawal or monthly paper statement could start being charged.
Interestingly though banks are adapting to the rules that the government has brought into play. But with banks changing their tactics, the government is trying to stand in their way once again. In fact the Federal Reserve has been requested to overlook bank operations and prevent them from imposing hidden or additional fees. A US senator has asked the Fed to give special attention to the banks as they try to implement some of the adjustments they are making to balance the effects of lost revenue. If the Fed indeed chooses to supervise the steps taken by banks then politicians and the financial industry will be in a tug of war.