Will free checking disappear?

Patrick says we'll likely see smaller banks paying interest on checking accounts, such as RewardChecking, as long as the customer fulfills certain obligations such as using their debit card 10 or 15 times per month, or having a check direct-deposited to their account at least once a month.

Larger banks may offer noncash rewards based on debit card usage. Debit cards, traditionally, haven't earned reward points, but that's changing. Some free checking accounts may not have strings attached but will be bare-bones, requiring online-only access, no tellers, no drive-up -- ATMs only.

Some banks are already steering customers in that direction.

Chase offers Chase Checking, no minimum balance required and no monthly service fee as long as you have a direct deposit or post five or more debit card purchases to your account each month. Withdrawals from an ATM and cash advances don't count. If you don't fulfill the requirements a $6 fee will be assessed per month.

Fifth Third's Rewards Checking gives one point for every $1 spent using the bank's debit MasterCard. Another point is earned for every $10 deposited through direct deposit. The bank waives a $3.95 World Debit MasterCard fee every month that the customer has $1,500 or more in monthly signature-based debit card activity.

Israel says a Novantas survey of 2,000 checking account customers nationwide identified six unique profiles, and that successful banks will consider a broad range of products to attract and keep these customers.

The six profiles are:

Runaway spenders -- They want the money now even if it overdraws their account; they'll pay the overdraft fee.

Predictability seekers -- They're in free checking now, but would pay a monthly fee if they know that fee is all they're paying.

Information/control seekers -- They have their phones rigged to tell them every time a transaction goes through, but they're willing to pay a fee for the service. They see a value exchange with the bank.

Self-service -- They'll forgo checks, branches and gladly conduct their business online. But they're so averse to fees that there's nothing a bank can do to get them to pay for something.

Traditionalists -- They want to talk to someone, they believe in free exchange and they don't want rewards. They think if they get rewards they're paying for them somewhere.

Rewards junkies -- They'll give the bank their business but the bank must give up something in return, e.g., better rates, etc.

The fact is the pool of customers who pay penalty fees is shrinking every year, according to industry statistics. Israel says in some institutions the decline is as much as 10 percent a year. Banks were already revving up new ways to make free checking accounts more profitable; the overdraft rules will simply speed up the process.

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