Free Checking Accounts: This For That

There was a time, not so long ago, that people were free to choose.  They could do a thing, and, based on that thing, expect a specific outcome.

This was as true in banking as it is in everything in life.  There is no free lunch.

However, then came along lawmakers.  Those people who think they can institute “fairness” and legislate morality.

These people felt they could pass laws that would limit banks and limit ill begotten profits all in the name of “the common man”.

Now we see the fruits of their labor.

Next month, laws new laws are expected to take effect.  These laws, passed with the good intention of protecting the “little guy” are going to do the exact opposite.

See, in the past, banks would charge merchants who use their debit cards, and now, that ability has been curtailed:

Regulatory changes to be issued July 21 are expected to sharply limit the fees that banks can collect from merchants whenever customers pay with debit cards.

Hmm, so, banks are going to be limited on what they can charge people?  I wonder what they are gonna do?

Well, they are gonna look for ways to make up for that lost revenue in other ways:

Bank of America is testing a new lineup of accounts that come with fees ranging from $6 to $25, depending on the level of service selected. Citi already revamped the terms on its checking accounts last year to include higher fees in many cases. Chase, PNC Bank and Wells Fargo ended or scaled back their debit rewards programs.

Free checking?




Gone are the days when banks would be able to allow market forces to dictate revenue and pass that revenue onto consumers.  Now, with added “bank regulation”, customers, the regular guy, are going to get the short end of the stick.

How can you expect this to impact you?

Lemme count the ways:

Free Checking

You may have to do all your banking online, for example, rather than going into a branch. Or you may have to maintain a minimum balance or make a certain number of transactions every month.

Only 65 percent of checking accounts were free in 2010, down from 76 percent the previous year.

Much of that pullback was a response to another regulation last summer that prohibits banks from enrolling customers in overdraft programs without their consent. Overdraft fees, which are often $35 or more per violation, were an important revenue stream for banks.

The horror.  Banks had to stop charging people who would demand and expect on the spot loans without qualifications!

Rotten bastards!

Debit Rewards

Rewards programs for debit card purchases are a valued perk for many checking account customers, but they may soon only be available to the top customers, if at all.

In April, Wells Fargo stopped enrolling new customers in its debit rewards program, citing the regulatory changes and costs facing the industry.

Chase has already made the decision to end debit rewards for both new and existing customers.

At PNC Bank, only premium customers will continue to earn debit card rewards.


Banks used to give stuff away.  Now they aren’t.

That’s GOOD legislation if I ever saw it.

ATM Fees

Ahh, this is my favorite.  Not only does a bank have to provide a whole machine that is close to you, but they have to provide said machine for free!

In some cases, banks may start imposing out-of-network fees on customers.

TD Bank, for example, says it will now impose a $2 fee when customers use another bank’s ATM. Other banks, such as Citi, have hiked their existing fees for using an out-of-network ATM.

Chase earlier this year even tested ATM fees of $4 and $5 for non-customers who used its ATMs in Texas and Illinois, but the bank dropped the tests a few months later without providing a reason. The fees in those states were lowered back to $3.

Hmmm, the sweet SWEET smell of regulation in late spring…..

Other Fees

Chase, for example, is testing a $3 monthly fee in northern Wisconsin for checking account customers who want a debit card.

Chase has also said there have been discussions about capping debit purchases at $50 or $100 per transaction.

In other cases, customers who aren’t able to maintain a minimum balance may be offered a prepaid card instead of a checking account. Prepaid cards, which are not subject to the new cap on merchant swipe fees, are not tied to checking accounts but work like debit cards and can be reloaded with cash.

People view regulation as damage.  And they route around it.

Look, no one has the “Right” to a bank.  No one “Deserves” a debit card or credit on demand.  These are things that people are willing to provide for a fee.  Pay the fee and experience the reward.  Don’t….and don’t.

But when you pass laws that punish certain behavior, do NOT be surprised by other ugly behavior.

5 responses to “Free Checking Accounts: This For That

  1. These laws do not save people money. Banks don’t exist as a charity and they will find different revenue sources when lawmakers shut down existing ones. The costs hit the consumer regardless and the laws themselves add another cost layer as dealing with these regulations is an expense banks would have otherwise not realized.

    • Banks don’t exist as a charity

      I agree Dave. People feel that consumers have “rights” to services that other people provide. I don’t.

      Its for this reason that I don’t think we should regulate Pay Day lenders. If Pete is short on cash and needs to pay $100 so his heat stays on, he is going to think that the 20 bucks in fees is worth it. Is that heavy for a loan? Sure. Is Pete capable of rational decision making? Sure.

      In fact, if you regulate these pay day lenders out of business, Pete is still going to need that hundo and with that lack of legal businesses to help him, he’s gonna go somewhere else for a loan….

      [cheesy Italian accent] The day may never come when I need you to repay this favor, but if that day SHOULD come, I will ask that you remember this kindness I extended you….[/cheesy Italian accent]

      • We seem to agree quite a bit. Pay day lenders have been under fire for providing a service that people voluntarily use. If they get regulated out of existence, there will just be a black market for pay day loans. And when this happens, we have created criminals where there were none before.

  2. The debit card fees being charged to merchants by the banks were excessive. Banks charge a fee to a retailer that accepts a credit card because the bank needs to “provide” the funds for the transaction. Debit cards are different. The customer has already provided the funds by pre-loading the debit card. The bank merely needs to transfer those funds to the retailer.

    • The debit card fees being charged to merchants by the banks were excessive.

      The cost of those fees are embedded into the cost of goods sold. To the point they can, the merchant will try to eat the costs, but at some point, they’ll consume too much profit margin and they’ll slide those to us. The law was passed as a “consumer protection” move. It didn’t protect us, it just moved the pain from the counter to …. in this case, free checking accounts.

      I guess it’s easy to think of it this way: Do we pay the banks when we open a checking account or when we buy stuff?

      The irony is that this is one of those embedded “taxes” that has Angela worked up. See, now, “qualified customers” will get the free checking and the perks. The “qualified customers” are the wealthy. So the burden will fall heaviest on the lower income folks. When we were charged fees….the wealthy were hit when they used their plastic; and I bet they “shop more” than the lower income people.

      Weird thing, economics 😉

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