Of the six biggest banks in the Dayton area, the only checking accounts offered that require no minimum balance or direct deposit are Huntington and PNC Financial Services, a Dayton Daily News analysis shows. The comparison was of basic checking products that offer check-writing options.
To require customers to have direct deposit or maintain a certain balance to avoid fees encourages them to keep their primary checking account at that bank, said Shon Myers, president and chief executive officer of Farmers & Merchants Bank, a small community bank in Miamisburg. And if customers have their paycheck coming to the bank, the hope is then all their other business will flow there as well, such as auto and home loans, Myers said.
“If you’ve got direct deposit and online banking somewhere, you’re not going to switch easily,” Myers said.
It costs KeyBank customers, for example, $2.50 to withdraw money at automated teller machines not in Key’s network. KeyBank increased the fee in April from $2. In September 2011, Key introduced a $3 fee to have paper statements mailed.
In June, Fifth Third Bank and U.S. Bank changed their overdraft charges, which increased some fees.
It will cost $8 or $11 a month, depending on customer balances, under new checking accounts Fifth Third began testing in the Cincinnati-Dayton market in June. That’s the only choice for new customers. However, fees on these basic personal checking accounts can be waived if the customer keeps average monthly balances of $1,500 across checking and savings accounts or maintains monthly direct deposits of at least $500 a month.
Jon Spiller of Kettering, a Fifth Third customer, said the bank told him he was lucky.
“The account I have I noticed got grandfathered in,” Spiller said. “They’re starting to get to where you have to have a minimum balance.”
On Oct. 15, local U.S. Bank customers will pay $6.95 to receive their bank statements online or $8.95 to get it by mail. These fees, too, can be waived by customers who keep certain balances.
“We introduced a new suite of checking accounts across our footprint just over a year ago, but did not immediately introduce a monthly maintenance fee on our Easy Checking account in certain markets for competitive reasons. As of Oct. 15, we will align the pricing for Easy Checking to be consistent across the footprint,” said Nicole Garrison-Sprenger, U.S. Bank spokeswoman. “Even with the monthly maintenance fee for Easy Checking, more than 80 percent of customers have their fee waived because they have automatic deposits of $500 or more monthly or because they maintain $1,500 in combined balances.”
Fifth Third, JPMorgan Chase and U.S. Bank offer free checking to military members and college students.
Community banks and credit unions are seizing the opportunity to promote their free checking products.
One of the larger regionally based banks, First Financial Bancorp, introduced a free checking account in September. Previously, its basic account had a $4 monthly fee that couldn’t be waived.
“With eFree Checking, there is no monthly maintenance fee and clients receive statements electronically. With the Simple Account, there is a $4 monthly maintenance fee and clients receive both paper and electronic statements,” said Jill Wyman, co-chief retail banking officer for First Financial.
Nationwide, 39 percent of non-interest checking accounts are considered free, according to a Bankrate.com study released Sept. 24. Bankrate.com is a website that tracks interest rates for various mortgage, debt and retirement products and has conducted the checking account study for 15 years. In 2009, 76 percent of personal checking accounts were free, the company said.
Average ATM surcharges, fees charged by an ATM operator to non-customers, are a record average of $2.50 per use.
Overdraft fees, which inched upward 1.4 percent this year, are commonly $35, the Bankrate.com study found.
“Free checking started to gain momentum around 2003,” and since 2009 has dropped “significantly” said Greg McBride, a Bankrate.com senior financial analyst.
“I think the takeaway for the average bank customer is that while free checking has declined in prevalence and will continue to do so, it’s not going away completely. Free checking remains in reach of a majority of Americans either by signing up for direct deposit, or maintaining a balance at your existing bank or by switching to one of the many smaller community banks, credit unions and online banks that continue to offer free checking,” McBride said.
“The reason that we’ve seen free checking decline in the past few years is because of recent regulatory changes that have left a large revenue gap for banks to fill. And they haven’t filled that gap yet,” McBride said.
Financial industry regulations and an extended low interest rate environment because of economic conditions are driving the changes, said Bryan Carson, head of deposit products for Huntington.
Financial reform reduced fee revenues by allowing customers to opt-in on overdraft protection and by capping fees charged to process debit card transactions.
“The big focus of this is it does cost a lot to service a checking account. Generally, you’ll see the cost to service a checking account is several hundred dollars a year,” he said.
Huntington hopes its “asterisk-free checking” attracts more customers, which gives the bank an opportunity to sell them more products and services.
“That’s the tradeoff. We want more customers and we want more of their business,” Carson said.
KeyBank customers can avoid the fees, said Rich Vaughan, the bank’s southwest Ohio district retail leader.
“We spent a lot of time with our clients about how they use their account and what’s the best way to use the account,” Vaughan said. “If one of Key’s clients is using their account say 1.5 times a week, they would not see a monthly maintenance fee. That includes buying a cup of coffee and using the ATM.”
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