FREE to FEE checking

TCF Bank Cutting Off 'Totally Free' Checking

Excerpt:

TCF Bank has long boasted of their offer to provide customers with "totally free" checking accounts, but that is soon to be a thing of the past.

According to a representative from the Twin Cities-based bank, TCF has already begun the process to no longer offer fee free checking.

The bank intends to introduce a monthly maintenance fee to over 1 million current checking accounts. The bank has not placed fees on these accounts for nearly a quarter century.

Free checking was first offered in 1986. They were the first bank in the marketplace to offer this opportunity, which bolstered their account base.

Comment: I read somewhere where they have 1.7 million checking accounts ... thus the change will impact approximately 60% of their customers!

Free Checking Could Go the Way of Free Toasters

Excerpts:

... free checking may be an endangered species.

Banks are feeling heat from all sides. This week, President Obama moved to limit the size and activities of the biggest institutions. Last week, he proposed a tax to recover bailout funds.

The biggest impact on checking accounts, however, is likely to come from new regulations governing overdraft protection. Starting in July, banks will need explicit permission from customers before allowing them to use their debit cards to spend more than they have in their bank accounts on a one-time purchase. Similar restrictions will apply to A.T.M. withdrawals.

Banks earn billions in overdraft fees, money that helps pay for free checking.

A chunk of that revenue will disappear when some consumers elect not to sign up for the opportunity to spend more than they have. This week, Bank of America said that $160 million in overdraft fee revenue had already disappeared, because of changes it made in its policies ahead of the new federal rules.

When that money evaporates as other banks comply with the regulations, they’re going to try to make it up some other way, particularly if they’re paying more taxes to the federal government and have fewer ways to trade their way to outsize profits.

...

In the 1990s, Washington Mutual brought free checking to the masses. “It was an anchor product that allowed them to get customers in the door,” says Jim Neckopulos, a Hitachi Consulting vice president who worked with Washington Mutual at the time. Then, the bank tried to get customers to sign up for loans and other more profitable services that could subsidize the free checking.

Soon, most every bank had some version of free checking, and they were helped by the rise of the debit card. “People’s behaviors changed dramatically,” says Aaron Fine, a consultant and partner at Oliver Wyman. “They were no longer balancing their checkbook and were overdrawing their accounts with the card. And that’s what allowed it to be profitable.”

How heavily did banks lean on the overdraft fees? Well, G. Michael Flores of the financial services consulting firm Bretton Woods estimates that the average customer paid 12 overdraft or other insufficient-fund charges in 2009, often at $25 or $30 per transgression.

Comment: Sad to think that people don't balance their checkbooks. I still do. By the way, there is no good reason to overdraw one's account if one has access to online banking. Most banks provide this for free. Additionally many banks have a service where one can sent a TXT message of "BAL" to the bank and get an SMS message back in seconds! (I have this set up with both Chase and Wells Fargo. I can send the same TXT message to both banks at once and see which one gets back to me faster!)