Death of Free Checking Has Been Greatly Exaggerated

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The world of finance has been abuzz in past months about how a trend in increasing federal regulations will push banks to end their free checking programs. However, the recently released Bank Fee Survey results tell a different story: free checking may be here to stay after all.

When trying to avoid regulation, it's a time-honored tradition for businesses to cry poor

The recent results of the semiannual Bank Fee Survey are turning conventional wisdom on its head. Despite claims that free checking is dead, the latest findings show that 44.2 percent of checking accounts surveyed have no monthly maintenance fees.

Industry observers had speculated that new banking regulations being implemented in the past year would signal the end of widespread free checking accounts. As the federal government continues cracks down on excessive bank fees and perceived predatory practices, many experts surmised that banks would begin tacking on checking maintenance fees to boost profits.

However, the Bank Fee Survey finds that the proportion of banks offering free checking has remained virtually unchanged between January 2010 and July 2010.

Why the apparent inconsistency between the stories predicting the death of free checking and what banks are actually doing in light of new regulations? Richard Barrington, personal finance expert for, suspects that banks themselves may be promoting those stories as scare tactic.

"When trying to avoid regulation, it's a time-honored tradition for businesses to cry poor," he says. "I think that's where all the stories about the death of free checking have come from--bankers trying to scare the public, and by extension the politicians, about the consumer impact of regulation. Our latest data set paints a different picture, at least so far."

Barrington noted that the next data release in January 2011 will be one to watch closely for any signs of radical changes in the latter half of this year.

An online poll posted jointly at and another leading financial website,, confirms that many financial consumers have access to free checking options. In that poll, 58 percent of respondents stated that their bank offered free checking, no strings attached. Another 36 percent indicated that they were able to receive free checking by keeping a minimum balance or by bundling services.

"There are nearly 8,000 FDIC-insured institutions out there," says Barrington. "Banking is a big, diverse market. That means lots of choices for consumers. Some account terms are better than others--and if you shop around, you can do better for yourself."

Other data released in the Bank Fee Survey are not as encouraging for checking account holders. Both ATM fees and overdraft fees are up from January 2010. Using another bank's ATM now costs an average of $2.14 compared to $1.88 six months ago. Meanwhile, consumers now pay an average of $29.26 for each overdraft fee instead of the $28.81 average charge from earlier in the year.

Still, Barrington advises consumers that low cost banking options can be found and emphasized that the fees that rose are avoidable.

"Monthly fees range from nothing to $50. Overdraft fees range from $18 to $35. ATM fees range from $0 to $2 for a bank's own offsite machines, and from $1 to $3 if you use another bank's machines," he said. "The message is, shop carefully and you can get a very good deal on banking services. On the other hand, if you are complacent and don't do your homework, you could find banking to be very expensive."

First commissioned by the New York State Banking Department, the Bank Fee Survey is conducted semiannually. Further analysis and survey details may be found in the article, What's Up (or Down) With Bank Fees? has been a leading source of information on bank rates, personal finance, savings accounts and investing since 1999. The site provides consumers with the highest money market rates, savings account rates and CD rates.

Richard Barrington is available for interviews on this topic and other topics relating to personal saving and investing. To interview Richard, please contact:

Jessica Austin

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Jessica Austion
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