For years banks have been offering consumers alluring offers in order to entice them to open accounts. As a result consumers enjoyed a lot of perks and promotional benefits when opening a checking account.
Traditionally offering consumers giveaways and deals is a great marketing approach, and free checking has been a popular enticement in recent years. Due to the competitive nature of the banking industry consumers have long benefited from the availability of free checking accounts.
In 2010 that has changed. As banks in the U.S. faltered and the Government intervened with a $700 billion bailout, the industry is currently in the process of trying remain profitable.
And it seems the days of free checking is steadily coming to an end.
The Wall Street Journal reports “Facing new revenue-crimping regulations, big banks are whittling away at free-checking offerings and adding stricter requirements for avoiding monthly maintenance fees, from higher minimum balances to mandatory direct deposits of at least a certain amount.”
A recent Bankrate.com survey published in October 2010 showed that the percentage of free checking accounts is beginning to decrease; in 2010 alone it fell from 76% to 65%. Additionally other fees and requirements are being included in routine checking transactions; presumably consumers are now absorbing some of the costs the banks used to cover when the industry was in a better financial position and did not have stringent Federal regulations to comply with.
Other fees being shifted to the consumer are increases on nonsufficient fund (NSF) penalties when consumers ‘bounce’ a check, heightened ATM fees, and a higher requirement for minimum balances in checking accounts. Bankrate reports that average minimum balances on non-interest bearing checking accounts have increased from $185.75 to $249.50 and the interest bearing account requirement increased by about $500 in 2010.
Additionally the banking industry is also making a stronger push for electronic banking; likely this is being done to eliminate the costs associated with paper banking. Earlier in 2010 Wachovia began charging their checking account customers who receive a monthly paper statement with images of cashed checks a $2.00 fee, whereas it had been free for years. Bank of America began offering “eBanking” which does not have a minimum balance requirement, but consumers must do electronic deposits and withdrawals; if not they will be charged a $8.95 monthly fee. Citibank has also mandated specific criteria for transactions, if customers do not comply, will be charged an $8 a month fee.
Banks are also seemingly targeting little-used checking accounts because they are not producing strong levels of revenue and offer little opportunity to produce more business in the future. (Wall Street Journal) The banking industry is seeking to pave the way to a more profitable future and is focusing on strategies that will meet this objective.
In today’s age, banks are no longer in the stable financial position they once enjoyed. Nowadays banks are looking to pick up any additional fees they can while simultaneously trying to cut operational costs associated with transactions. Technology is likely to play a large role in this attempt to regain some financial stability as the banking industry continues to navigate to the online electronic environment.
Despite the current surge in fees and requirements being passed on to the consumer, in the future the banks are likely going to also be heavily competing to maintain customer loyalty. In the long run consumers may find themselves being offered different kinds of perks as a proverbial carrot to remain with a particular bank. So while right now things look bleak in terms of fees associated with checking accounts, this could change down the road.