LAKE FOREST, Ill. (9/5/14)--Fewer banks than ever offer free checking, according to a new study from Moebs Services, which also noted checking remains a mainstay at most credit unions.
About 47.9% of banks offer free checking, compared with 79.6% of credit unions. That 31.7% gap is a historic high, Moebs reports.
Consumers have parked $1.6 trillion in checking accounts--another record high, Moebs said.
The Moebs Checking Study identifies banks as leaving free checking to adopt relationship pricing checking--in which multiple services become the key to profits.
A Sept. 2 article in The Wall Street Journal seems to back up the assertion that banks are moving to a new pricing model on checking as they earn a smaller share of profits from customer-account fees. Customer fees fell nearly 21% to $32.5 billion last year from $41.1 billion in 2009, according to the Federal Deposit Insurance Corp., The Wall Street Journal reported.
As a percentage of total noninterest income, deposit-account fees dropped to 14.1% in 2013, the lowest level since 1942, according to the FDIC data. From 2000 through 2009, such fees accounted for an average of 17% of such income.
More than half of the account fees on average are collected for overdrafts and returned checks, the Consumer Financial Protection Bureau reported in July.
But banks have been collecting fewer of the those fees since 2010, when Federal Reserve put in place a new regulation to curb abuses by financial institutions. Since then, consumers must explicitly opt-in for overdraft coverage on certain transactions, or the financial institutions can't charge those fees.
Banks are adjusting to the declines in fees with new strategies. For example, rather than relying on the account fees, First Tennessee Bank, Memphis, is trying to persuade customers to buy stocks, mutual funds or other investment products that can reap more profits than a checking account. Before 2010, First Tennessee offered free checking. Now it charges for most checking accounts and pushes customers to hold higher balances in their accounts to avoid fees, The Wall Street Journal noted.