Free checking accounts are slipping away, with only 46 percent of banks still offering them to their customers.
That’s a major change from 2009, when more than 78 percent of banks offered the freebie, according to a national survey done by bank research firm Moebs Services.
Yet most credit unions are still offering free checking, even though a few have cut back too, said G. Michael Moebs, chief executive of Moebs Services. “Credit unions believe their members want free stand-alone checking” so they offer it to cement relationships with customers.
In other words, at these institutions free checking isn’t a reward for doing other business. Customers who have checking accounts can simply count on the traditional way they have banked. On the other hand, many banks may only offer free checking to people who have broad relationships with the institution, like using investment services.
Now 73.6 percent of credit unions are offering free checking. In 2009, 84.9 percent did, and last year it was 79.6 percent.
Institutions have been cutting back on the freebie as costs have risen, Moebs said. Both banks and credit unions are spending heavily on security to discourage fraud, and since the passage of Dodd-Frank legislation, the costs of complying with new regulations have risen, he said.
Before new regulations enacted after the 2008 financial crisis, a $1 billion institution might have had one person working half-time to make sure government regulations were obeyed; now it’s four to five people, he said.
In addition, the number of transactions people do monthly in their checking accounts has risen sharply since people started using debit cards for small purchases, he said.
Unlike in the past, when checks might have been devoted to paying bills and making a few large purchases, now “the average person uses their debit cards to pay for Starbucks or a sandwich.”
As a result, the average person does 50-60 transactions a month, compared to 20-25 in the early 1990s. And there are added costs with the transactions since each involves accounting, he said.
Individuals interested in free checking will be more likely to find it at credit unions, Moebs said. But he suggests that people also consider other costs beyond checking when selecting institutions. For example, he said, many institutions charge $30 for each overdraft, while some keep the fee at $25.
Community banks, rather than large banks or credit unions, tend to have the lower overdraft charges, Moebs said. So the combination of free checking and lower overdraft charges might be more likely found at community banks.
When shopping for free checking, Moebs said to be aware of “bait and switch” tactics and make sure the free checking is solid. Also, note other services important to you like 24-hour access to your account through your mobile phone. Some offer desktop access but not mobile access.