The End of Free Checking and How to Avoid Monthly Account Fees

Free checking is coming to end thanks to new Financial reform regulation that will force banks to cut overdraft and ATM fees, which traditionally covered the cost of providing free checking accounts. Bank of America and Wells Fargo, US banks with the largest branch networks, have already started to discontinue free checking accounts for new customers. Existing customers are safe for now, but this could change as no restriction free checking accounts are scaled back over time. Most basic checking accounts will soon carry a $2 to $10 monthly account keeping fee. However, there are ways to avoid these monthly account fees that include:

  • Maintain a minimum deposit. Most banks, as they do today, will waive their monthly account keeping fees if you maintain a specified minimum balance. This minimum balance is generally between $1000 and $2000 and is calculated as an average over the month or end-of month balance. So, rather than keep the majority of your funds in a high interest savings account it may be more cost effective to put just enough money in your checking account to meet the minimum requirements for avoiding bank fees.
  • Direct Deposit. Another way to avoid monthly account fees is to have a direct deposit to your checking account. Most big banks will waive their account keeping fees if you have at least one or two direct deposits (over $100), like your pay check or SSI payment. I used this feature when opening a Bank of America checking account a couple of years ago, but then also scheduled an automated transfer to my higher yielding online savings account a couple of days later. This allowed me to avoid the monthly checking account fee while earning more interest on my savings in a higher yielding online savings account.
  • One-stop combo banking. In most cases if you have a mortgage or credit card with a bank, they will be more than willing to offer to offer you a free checking account or waive the associated fees. All you need to do is call them up and (based on personal experience) they will be happy to have your business and in some cases will even offer a bonus for bringing all your banking needs to them.
  • Go with a credit union. If you’re just plain ol’ sick of dealing with banks and their rising fees then go with a local credit union. In most cases their accounts are fee-free and straight forward. They may not have all the features of a “majors” bank account, but should meet the checking account needs of most people.

In the next few weeks and months, look for letters from the various financial institutions you have accounts with on potential new fees and/or tighter conditions to keep your current banking free. There should still be ways as mentioned above to avoid these monthly fees but one thing is for sure, the days of 100% free banking are gone.

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9 thoughts on “The End of Free Checking and How to Avoid Monthly Account Fees”

  1. I’ve been a BofA customer for 30 years, beginning in San Francisco. I was always happy with the Bank and its services until last year. Since then, I’ve been lazily looking around for another Bank, but I think this is the last straw and my search will accelerate. Years ago in S.F., I called the CEO’s office (name was Armitage?). Spoke with his Wharton MBA Executive Assistant for almost an hour. Nice guy and fascinating conversation. But, those days are evidently long gone. There’s simply no interest, no trust, no respect. BofA has become another giant black hole. Buh, bye.

  2. This new fee change is so wrong. I’m a full time student, and I have a student checking account with Bank of America. I obviously don’t have a job, which means I can’t put 100 dollars a month for the checking fee to be waived. $4 is already a big deal for students. $4 can already be paid for my daily transportation and even a lunch. I really need my student checking account to buy cheaper books for school… This new fee thing is just so wrong, specially charging full time students who are already struggling financially while keeping up at school. I can’t accept this. I hope this comment will reach at least one person that can do something about this new fee rule. I’m totally affected, and I’m sure other students will be affected too.

  3. First off many people won’t be effected by some of these changes. People that have numerous accounts with banks (checking, saving and money market accounts along with various loans, investments, CD’s and debit & credit cards) will still get free everything. Because you are a profitable customer nothing will change. Take it from a former bank manager the checking accounts that have an average daily balance of five bucks throughout the month and never use any of the other services are big money losers. Along with that they were big time wasters as these seemed to be the customers that are constantly coming in to make 3 dollar deposits so there was enough money in there for a cup of coffee and called up every five minutes to ask their balance. It wasn’t worth the time and money to deal with these accounts. Somehow it developed to the point that people think it is their god given right that checking accounts were free. It is a great business decision to get rid of these money losing accounts.

    While credit unions work great for some people they lack a lot of sophisticated products that some people like. Beyond that it is quite interesting in their biggest business advantage… tax free status. Level the playing field with banks and there cost structure and products would look very similar. It use to be that to get into a Credit Union you had to belong to a very select group. Now they advertise and basically anybody can join. I am a bit surprised the last time their tax status was reviewed there was no change.

  4. Bank of America is one of the most despised and criminal organizations in America. Then to use the name … America. Why did the government hand $50,000,000,000 almost interest free at a time when stocks went multiple times up in less than a year. The government if it hands out American worker’s hard earned cash should take secondary stock, which would have put the offering at half the crashed price, and profit from the recovery rather than save the Monster.

    The sickly government should now own Bank of America and have the Big Buck Executives doing chain gang work. Just imagine a BAC high roller raking up oil in the June sun in Louisiana.

    Time to toss out all the paid pampered Senate and Congress. Anyone would be better than who we have. If half of Congress gets tossed out possibly the other half will actually work for America not Bank of America.

  5. “‘Customers will have a choice,’ said one B of A exec quoted by the WSJ: ‘Bringing more relationships to us or paying a maintenance fee.'”

    Well, there IS a third choice – jumping ship for a new bank. Like Mr. Fleishman, I gave up on WaMu years back for one of the local credit unions, and have never looked back.

    And I’ve never understood how banks could get away with touting free checking as such a great service. If the bank had to hold on to my actual cash, like a safe deposit box, I could see it. But it’s likely that at any given time, most bank deposits are being invested to make money for the bank. This quest to make a profit from every single person who walks in the door is getting out of hand.

  6. Thanks again Federal government for “taking care” of me. I have managed, without your help, to avoid all banking fees by following the rules, not over-drafting my account and not using any ATM that charges a fee. I’ve gladly allowed those stupid people who pay no attention to pay the fees and provide me with free banking! I also use my credit card for practically all of my purchases to gain the rewards. All I have to do is pay my bill in full each month. A real no-brainer! Please big brother! Stop helping me!

  7. Part of the issue here is that I think some people are looking for solutions where they essentially are able to have their cake and eat it too. That’s not going to happen.

    The purpose behind both this overdraft legislation and the credit card legislation is to end practices which are considered predatory and very unfair by a large number of Americans. Yes, in some cases that will cause some undesirable side effects, but if those side effects are far less predatory, are considered more fair by more Americans, and/or promote a greater sense of truly free market competition then what that means is we exchanged a flawed system for a system which is still flawed, but just not as much as the old system according to most people.

  8. Free checking, like “free” radio and “free” internet news, is a simple fact of life for most people. I welcome B of A to a learning experience: try it and see how many customers move to a free account at a local bank. These days when so much is done electronically, banks are not spending nearly what they were spending in the 1980’s to clear paper checks. I may write 5 checks a month now, sometimes fewer. Banks can always offer an incentive to their customers to go “all electronic” and making THAT (no paper) the free checking alternative. I have personally not gone “all electronic” because my bank has offered me no incentive to do so. It seems to me that would be a win-win for the banks and their customers.

  9. WISH that ending free checking would help move people to small local banks, but I doubt that most people will go to the hassle of switching. I have always banked locally my whole life and gotten free checking. When I worked for First Interstate, I was shocked to learn that people actually paid for their accounts (AND got crappy service on top of it) when they didn’t have to. That was 30 years ago. If people have always paid for crappy service, why would people change now?

    What I want:
    1) Cut Pentagon budget by 2/3rds
    2) End all wars yesterday
    3) Fine companies for OUT-sourcing jobs
    4) End ALL government contracts to companies who choose to incorporate outside of the United States and thus refuse to pay their fair share of taxes.


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