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If you’re looking for more ideas for saving money in 2012, there’s some bad news. The once-prevalent free checking account is quickly fading away. More banks are charging monthly service fees on checking accounts, waiving them only for certain banking customers.
“Fees have been going up for years, but the recent twist we’ve seen is a significant decline in the availability of free checking accounts,” says Greg McBride, senior financial analyst with Bankrate.com. “The good news for consumers is that free checking is still available if you’re willing to shop around. Many of the fees that are being instituted can be avoided.”
Just 45 percent of non-interest checking accounts are now free, down from the peak of 76 percent two years ago, according to Bankrate’s 2011 Checking Account Survey, conducted in August.
Increasingly, banks are charging service fees if customers don’t maintain a significant monthly balance. For instance, some banks charge a monthly fee if a non-interest checking account falls below a set minimum daily balance. For interest-bearing accounts, those fees and minimums can rise precipitously.
“With recent regulatory changes that have squeezed banks, the free checking account has become a casualty,” McBride says. The Federal Reserve has cracked down on bank overdraft fees as well as on how much banks charge businesses for processing debit card transactions (called debit card swipe fees). “It was these two revenue streams that permitted banks to offer free checking,” McBride adds. “You crimp these two revenue streams, and free checking becomes the casualty.”
Shop around, McBride says. Community banks, credit unions, and online banks may still offer free checking. If you don’t want to change banks, take heart. “If you want to stay at your current bank, you may be able to avoid the fees based on other accounts at the bank,” such as savings accounts, CDs, car loans or mortgage accounts, McBride says. “If you are intent on staying with your bank, something like direct deposit may be enough to avoid the fee.”
Tips to avoid banking fees
Do your research. Check your bank’s website to see its policies and fees. Research smaller community banks and online banks to see if they offer free checking. For a survey of banks in your area, use the checking account search engine at Bankrate.com.
Make direct deposits. Often, you can avoid monthly service fees if your employer makes direct deposits into your account.
Link accounts. You may be able to link savings accounts, CDs, IRAs, and other accounts to meet balance requirements.
Beware of overdraft fees. McBride calls overdraft fees “the speeding tickets of the banking world” and says they are “something that’s easily avoided, particularly in this age of 24/7 online access.” Create an email alert on your account that will notify you if your balance is low. Banks are no longer allowed to automatically enroll customers in overdraft services; customers must opt in.
Avoid ATM fees. It can cost three dollars a pop to use an ATM that does not belong to your banking system. Find ATMs near your home and workplace that are associated with your bank, or, instead of using an ATM, get cash back when making debit card purchases at a retailer.
Go paperless. Some banks charge fees for check images or for providing hard copies of your statements. Avoid the fee by going paperless and getting electronic statements.
A Chicago-based writer and editor, Eve Becker writes about personal finance, health and other topics. She is a former managing editor of Tribune Media Services.
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