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Say Goodbye To Free Checking Accounts

By Mark Riddix

I was reading an article in the Wall Street Journal about how banks are about to increase fees on accounts that used to be free. Free checking may soon go the way of the dinosaur as banks are looking for a way to raise money after the passage of the CARD Act last year. Commercial banks are trying to raise money since the CARD Act is expected to reduce bank revenues by billions of dollars in lost overdraft fee income. In response, banks are coming up with new ways to take more of your savings.

Here are a few of the strategies that banks are considering adopting:

No More Free Checking
There was a time that banks were competing for your business by offering great perks like free checking. Well, not anymore! Many banks are completely eliminating free checking accounts. Customers will have to pay a service charge known as a monthly maintenance fee for the privilege of having a checking account. Monthly service fees are ranging from $9.95 to $15. This is a substantial hit to banking customers which could end up costing you as much as $180 a year.

Increased Minimum Balances
Banks are increasing the minimum amount that you need to keep in your account to avoid a service charge. Most banks had no minimum balance requirement to avoid a service charge. Banks are now considering imposing minimum required balances on all checking accounts. These amounts would range from $2,500 to $10,000 dollars. You better keep your balance high in the future if you want to avoid bank fees.

Increased Use Of Banking Services
Banks are giving customers a way to avoid service charges. The “wise” solution is to use more bank products. Here are a few ways that you can get around the increased service charges:

  • Use the ATM machine and online banking more frequently.
  • Use your bank credit cards more often.
  • Open a brokerage account at the bank.
  • Apply for loan products (home, auto, personal).

Most of these options will actually end up costing customers more money in the long run or plunge them deeper into debt. That’s not exactly the kind of help that you would expect from a financial institution.

Adding Fees To Products That Used To Be Free
Did your bank used to give you free checks with your checking account? How about monthly account statements, were those free as well? Banks will now impose check fees for anytime that you need to reorder checks. There are also $2 and $3 dollar paper statement mailing fees. Some banks are even charging fees if you go in the bank more than twice a month. It’s only a matter of times before banks start charging you to get a debit card.

If your bank is engaging in these nefarious practices, you should definitely take a look at the advantages of a credit union. Also, check out the option of joining an online bank like Capital One 360.

What is your take on these newly proposed bank fees? Do you think that banks are justified in charging these news fees? Why or why not?

Mark Riddix
Mark Riddix is the founder and president of an independent investment advisory firm that provides personalized investing and asset management consulting. Mark has written financial columns for Baltimore and Washington, D.C. area newspapers and is the author of the book, Your Financial Playbook.

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  • Jesse

    Yet more great reasons to say goodbye to banks and go with a credit union.

  • http://www.startwelllivewell.com Meghan

    I don’t think people honestly assess this kind of thing. Most might just “accept” it because that’s what all the other banks are doing. Credit unions are so foreign to people but hopefully they will become more and more popular as time goes on and banks continue to do this kind of crazy thing to steal money from their customers.

    I’ve always wondered why someone would want to be a customer at a bank when they could be a member at a credit union, anyway?

    The only bank account I have is with ING and that’s just because they’re awesome. =) My main account is with a credit union.

    • Mark Riddix

      Commercial banks are driving customers to online banks and credit unions with their numerous fees.

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