Banks are threatening to end free checking. Don’t panic | CNN Business (2024)

Banks are threatening to end free checking. Don’t panic | CNN Business (1)

Traditionally, banks have been able to offer free basic services like checking when they can make revenue in other ways, including various fees tied to your checking account. Should those fees be limited as some regulators are proposing, the question is whether banks will start charging for those once-free basic services.

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Most banks offer free checking if, for instance, customers have their paycheck direct deposited or they maintain an average minimum balance.

The majority of people with checking accounts (73%) take advantage of the option, according to a 2023 Bankrate.com survey.

But if regulatory costs go up for banks, free services like checking may go away, at least if they follow Chase’s lead. Marianne Lake, the head of Chase Bank, told the Wall Street Journal last week that Chase might stop offering free checking and other free banking services.

“Consumer banking is predicated on banks providing services forfreeto consumers such ascheckingaccounts, debit cards and electronic bill paying. The model then relied on banks being able to recoup those costs elsewhere in the consumer banking business, such as with debit interchange fees, overdraft fees, late fees and higher interest rates,” Jaret Seiberg, financial services analyst at TD Securities, wrote in an analysis of Lake’s comments.

The Consumer Financial Protection Bureau, for instance, has finalized a rule that caps credit card late fees at $8. However, it is not in effect yet because it is being litigated. The CFPB also has proposed that banks be limited in how much they can charge customers in overdraft fees. Separately, the Federal Reserve is expected to further limit how much banks can charge merchants when customers use their bank debit cards to make a purchase.

While banks — especially smaller ones trying to attract deposits — may still have to offer incentives to bring in customers, one consumer advocate doesn’t see customers running for the exits if their bank does in fact impose a fee on their checking account at some point in the next couple of years.

Bank accounts can last longer than a marriage

“People tend to stick with their bank accounts — sometimes more than they stick with marriages,” said Adam Rust, director of financial services at the Consumer Federation of America.

Rust is kidding/not kidding, apparently. Bankrate found that the average US consumer has had the same checking account for nearly 18 years. The median duration of first marriages that end in divorce is eight years, at least the last time the Census Bureau checked, which was in 2009.

The top three reasons people cited in Bankrate’s survey for staying with their bank were: “Happy with customer service,” “Always had the account” and “Convenient branch or ATMs.”

Apart from those reasons, Rust suggests another factor that might dissuade people from changing banks for any reason: With automated bill payment options, the idea of disentangling yourself from Old Faithful might seem like more hassle than it’s worth. He noted that you may have information on 10 to 20 service providers that you pay regularly embedded in your bank account records. So, if you were to switch banks, you might have to manually switch them all over.

In any case, he added, paying a modest fee for your checking account might not be the worst thing. That’s especially true if the reason your bank is tacking one on is because it will be limited in how much it can charge you for other things, like overdrafts.

That’s because upfront pricing is more transparent than being hit with higher, backend surprise fees. And it’s not like you’re not getting anything in exchange for a checking fee. “A bank account is very useful,” Rust said.

damircudic/E+/Getty Images Related article Fed decision buys more time for savers to profit from high interest rates

The average overdraft fee was close to $27 last year, according to Bankrate, which noted some banks charge as much as $38. The average fee on interest-bearing checking accounts, meanwhile, was $15.33. And the average fee for noninterest-bearing checking accounts was just $5.31.

Of course, if your money is with one of the largest retail banks in the country, such as Chase, you might skip the interest-bearing option altogether unless you have a high balance. That’s because the average interest paid is around 0.01%, despite credit card rates being at record highs after the Fed embarked on a rate-hiking spree in the past two years to tame inflation.

All that said, your free checking options might not disappear if a bank’s regulatory costs don’t change because there is too much pushback, or legal challenges prevail.

Or, if those costs do rise, maybe some banks might decide for various reasons not to eliminate free checking. For instance, after passage in 2009 of the Credit Card Accountability Responsibility and Disclosure Act (CARD Act), which limited some fees and interest charges, the CFPB found in 2015 that “total costs to consumers have fallen … and credit has generally become more available to consumers.”

Banks are threatening to end free checking. Don’t panic | CNN Business (2024)

FAQs

Banks are threatening to end free checking. Don’t panic | CNN Business? ›

A big bank threatens to end free checking. Others may follow. Here's why that sounds worse than it is. Traditionally, banks have been able to offer free basic services like checking when they can make revenue in other ways, including various fees tied to your checking account.

Which bank threatens to end free checking? ›

Marianne Lake, the head of Chase Bank, told the Wall Street Journal last week that Chase might stop offering free checking and other free banking services. “Consumer banking is predicated on banks providing services for free to consumers such as checking accounts, debit cards and electronic bill paying.

Is Chase Bank ending free checking? ›

Checking accounts may no longer be free if new federal rules are adopted, Chase warns. JPMorgan Chase is warning that banking customers may soon have to pay for many of the services they now receive for free.

Are banks going to start charging for checking accounts? ›

According to Wall Street Journal, JPMorgan Chase — the largest consumer bank in the country — plans are underway to circumvent the regulation by instituting more consumer charges for owning a checking account or using wealth-management tools.

Can a bank deny you access to your money? ›

A bank account freeze means you can't take or transfer money out of the account. Bank accounts are typically frozen for suspected illegal activity, a creditor seeking payment, or by government request. A frozen account may also be a sign that you've been a victim of identity theft.

Are free checking accounts going away? ›

All that said, your free checking options might not disappear if a bank's regulatory costs don't change because there is too much pushback, or legal challenges prevail. Or, if those costs do rise, maybe some banks might decide for various reasons not to eliminate free checking.

What is the new Chase rule? ›

As rewards credit cards become more popular, issuers have implemented their own restrictions. Under Chase's 5/24 rule, applicants with 5+ new cards over the past 24 months will not be approved. The best way to sidestep this restriction is to apply for Chase cards before pursuing other issuers.

Is Chase going to charge to have a checking account? ›

While there's no minimum deposit to open the account, it does have a $12 monthly maintenance fee. Customers can avoid the monthly fee by meeting any of the following requirements: Receive a minimum of $500 in monthly electronic deposits. Maintain a daily balance of $1,500 or more.

Why is Chase charging me a $25 monthly service fee? ›

Chase Bank charges a $25 monthly fee on Chase Premier Savings accounts. You can avoid the fee if any one of the following requirements are met: Balance at the beginning of each day of at least $15,000. Linked Chase Premier Plus Checking or Chase Sapphire Checking account.

How much do you need in a Chase account to avoid fees? ›

There is no minimum balance required to have a Chase checking account, but keeping a certain balance is one way to avoid a monthly fee on some accounts — for example, the $12 monthly fee for Chase Total Checking® is waived if you maintain a $1,500 balance at the beginning of each day.

How much do I have to keep in my checking account to avoid fees? ›

You'll need to meet the minimum balance requirement

Most traditional banks require you to maintain a minimum account balance to avoid monthly service charges. These typically range from $100 to $2,500, though most are much closer to the lower end.

What bank doesn t charge a monthly fee for checking account? ›

The Axos Bank Rewards Checking account offers a winning combination of features. There's no monthly maintenance fee or minimum balance requirement. and the bank provides unlimited reimbursements for domestic out-of-network ATM charges. Axos doesn't charge a non-sufficient funds fee either.

Can banks seize your money if the economy fails? ›

Your money is safe in a bank, even during an economic decline like a recession. Up to $250,000 per depositor, per account ownership category, is protected by the FDIC or NCUA at a federally insured financial institution.

Can banks see your other bank accounts? ›

In the US, while they cannot always see your individual transactions in accounts held at a different bank, they generally can see that you have an account there. The vast majority of banks in the US subscribe to one of several specialized credit reporting services such as Chex Systems.

Can a bank refuse to give you your cash? ›

Yes. Your bank may hold the funds according to its funds availability policy. Or it may have placed an exception hold on the deposit. If the bank has placed a hold on the deposit, the bank generally should provide you with […]

Is there any harm to closing a checking account? ›

The act of closing a bank account, such as a checking or savings account, does not directly affect your credit score. Your credit score is not directly affected by your checking and savings account activity. That includes account closures. Checking and savings accounts are not considered credit accounts.

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