Free checking has been a standard at most American banks for years, but the long-standing tradition could be on the way out. New data from Bankrate.com's 2011 Checking Study suggests that banks are increasingly putting conditions on free checking.
The site reports that as recently as two years ago 76 percent of all non-interest checking accounts were free. By last year that number had declined to 65 percent, but this year's data suggest that free checking accounts have now become the minority, with only 45 percent of non-interest checking accounts.
Fees also rose across the board for checking accounts, with an 8.5 percent increase in monthly fees and a 43.9 percent rise in minimum balances. However, the report suggests that more banks are also increasing opportunities to avoid these costs.
"The decline of free checking is in full swing, however, savvy consumers can take advantage of an increasing amount of fee waivers, most commonly with direct deposit," Greg McBride, senior financial analyst at Bankrate, said in a statement. "Ninety-two percent of noninterest accounts are either free or can become free."
The Wall Street Journal reported in June that the financial sector expected the end of free checking after failing to convince legislators not to implement the new limits on debit card transaction fees. One of the more controversial aspects of last year's Dodd-Frank Wall Street Reform and Consumer Protection Act, these new fee limits are designed to protect businesses from the high costs of electronic payment.
Banks insisted that the lost revenue would need to be made up, likely through higher costs for customer services like checking. Despite the rise in banking costs, however, Bankrate notes that the debit cards largely remain free.
NPR reports that research firm Moebs Services saw similar results in its study of banks, with more than two-thirds no longer offering free checking. However, the news service also reports that this trend has created an opportunity for smaller banks.
Particularly, given that the fee limits for debit cards are limited to banks with more than $10 billion in assets, smaller banks have noticed an opportunity to offer options larger banks cannot. A survey from Bankrate.com found that 64 percent of Americans would consider switching banks if their account were hit with more fees.