COLUMBIA – Changes in federal regulations that took effect last summer have prompted some banks to eliminate free checking accounts to make up for losses in revenue, but some local banks are bucking the trend.
One change required banks to stop automatic overdraft protection by asking customers to agree to the service. Previously, banks could cover overdrafts and then charge fees, typically $30 to $40 per transaction, that have brought in billions for U.S. Banks according to The Associated Press.
That regulation affected only ATM and debit-card transactions, not checks and automatic bill payments.
Another change limited the interchange fee, a percentage of each transaction banks and card processors receive every time a payment card is swiped. The result has been a steady decline in the practice of allowing free checking accounts.
A study by Bankrate.com, an aggregate of financial industry data and analysis, the percentage of free checking accounts available fell from 76 percent in 2009 to 65 percent in 2010, reversing a free checking trend that started in 2003.
"Free checking had been underwritten by the revenue from two other components: overdraft fees and the fees banks earn every time a consumer swipes their debit card," said Greg McBride, Bankrate.com senior financial analyst. "Both of those fees have been reined in by recent legislation."
Across the country, big banks have stepped up fees associated with checking accounts, but local banks and credit unions might offer relief from constant nickel-and-diming.
"Free checking has long been a staple in the product lineup of credit unions and smaller community banks," McBride said.
At Tigers Credit Union, ending free checking would be a "last resort," program director Laura Royse said.
The student-run credit union is not-for-profit. Because its shareholders are the members of the credit union, it offers competitive savings and loan rates while charging less fees, Royse explained.
"We do everything a bank does, but not for profit," she said.
To be a part of the credit union, one has to meet certain conditions, such as living in Boone County or being affiliated with MU.
At Boone County National Bank, free checking also is still available while the bank evaluates the impact of the regulations.
"We need to understand how the new regulations are going to effect us. Taking care of a checking account costs us money, about ($300 to $400) a year to maintain an account," said Mary Wilkerson, senior vice president of marketing at Boone County National Bank.
Costs to maintain an account include processing transactions, paying bank tellers, maintaining ATMs, mailing paper statements and providing online banking, bill pay and other services.
"Traditionally, (free accounts) have been supported through debit card income, but if its reduced significantly, we have to pass that cost along," Wilkerson said.
McBride said "free checking isn't going to go away completely, but it isn't going to be as widely available." Customers might have to change how they bank to take advantage of features such as direct deposit to receive fee waivers.
Here's a breakdown of the fee structures for checking accounts at some of the national banks in town v. Columbia banks:
- Bank of America: Offers an "eBanking" account with no monthly fee if you choose online paperless statements and make your deposits and withdrawals online or by ATM, without a teller. Otherwise the fee is $8.95 per month. A regular checking account is $14 per month, unless minimum balance requirements are met.
- Chase and Citibank, though not in Columbia, also have imposed monthly fees for checking accounts, with waiver options available.
- Regions: The LifeGreen Checking account carries a $5 monthly fee. This is waived with one payroll or government direct deposit of at least $10 each month, 15 electronic transactions per month or a $500 average monthly balance in the account. The fee is also waived for students younger than 26 and people older than 50.
- US Bank: Offers a free checking account with no minimum balance. Non-US Bank ATMs will result in a $2 fee for withdrawals, balance inquires and denied transactions.
- Wells Fargo: Offers a Wells Fargo Value checking account with a $3-per-month fee that is waived with either a monthly direct deposit of at least $250 or a $1,500 average daily balance.
- Landmark Bank: Offers a free checking account with no minimum balance and free checks.
- Commerce Bank: Offers a free checking account, but there is a $2 fee per paper transaction (check or withdrawal slip). If an account is inactive for 60 days or more, a $3 per month fee will be assessed. Paper statements are $1 per month. No free checks. An alternative is Commerce Bank's "myRewards Checking" account for a $7 monthly fee that is waived with a single ACH direct deposit of at least $500 or $1,500 in combined Commerce Bank accounts including checking, savings or money market accounts.
- UMB: Offers a free checking account with no monthly service charge, a Visa check card and paper statements. No free checks. No teller fees. Accounts with more features such as interest or free checks are available for a $10 monthly fee that is waived with a minimum balance of $1,000 or an average daily balance of $2,000.
- Boone County National Bank: Offers a standard free checking account as well as a MyChoice Checking account that carries a $3 monthly fee that is waived if a recurring direct deposit or a $750 average daily balance is maintained. It is also waived if the account holder makes 10 debit card transactions a month. Additional accounts are also free if similar conditions are met each month.
- Tigers Credit Union: Offers free checking account with no monthly minimum balance. Must meet certain conditions in order to be a member.
- Missouri Credit Union: Offers free checking account with no monthly minimum balance. Must meet certain conditions in order to be a member.