This shift away from free checking may be due in part to new Fed rules requiring customers to opt in for overdraft protection on debit cards and new limits on how much banks can charge merchants for processing debit card transactions. Being that overdraft fees and debit interchange fees are among the largest sources of revenue for banks these days, it's not unreasonable to expect banks to make some changes to the way they do business.
That said, getting rid of free checking might not be the best way to make up the difference. A recent study commissioned by the financial services firm USAA found free checking is really, really important to consumers.
The study, which surveyed 1,007 randomly chosen U.S. adults, found 70 percent of checking account holders considered free checking to be one of the most important services a bank can offer. Further, 44 percent of respondents cited free checking as the most important service a bank can offer.
No other banking feature came anywhere close to that 44 percent figure. Only 18 percent cited online banking access and tools as the most important, followed by 13 percent who thought having branches close to where they live is key, 13 percent who wanted easy access to ATMs and only 7 percent who thought rewards programs were the most essential feature.
Along with my own conversations with people, this poll makes me think banks are going to have a hard time holding on to customers if they implement checking fees. Just as newspapers and magazines who had been giving away their content away for free online to anyone who wanted to see it are now having a hard time getting people to pay for online subscriptions, banks are going to have a hard time rolling back the free checking wave. Because, while it's not quite as easy to switch banks as it is to switch online publications, if you're charging people $10 a month for something they can get for free somewhere else, why wouldn't they move?
People just aren't used to paying for checking anymore, and as long as free options exist, consumers will gravitate to them. My guess is that banks will have to find other ways -- cutting brick-and-mortar branches, increasing fees in other areas, cutting rewards programs or, God forbid, reducing executive compensation -- to make up those lost dollars.
And just to be clear, we're talking about a lot of dollars. The banking industry generated $37.1 billion in overdraft fees in 2009, according to Moebs $ervices. To put that amount in perspective, Apple's total revenue in 2009 was $36.5 billion. Even if a lot of regular overdrafters opt in to overdraft protection, as they so far appear to be doing, that's still a big hit to banks' bottom lines.
Do you think banks will get away with charging for checking? Would you switch banks to avoid maintenance fees?