VCR’s, phone books, maps encyclopedias, and now free checking? Is that too becoming a thing of the past? More and more the word “free” is missing from all of the fancy checking account names. I’m sure most of you have noticed that the big banks have ended the no-strings attached free checking accounts. Banks, already reeling from huge losses in revenue due to new restrictions on credit cards and overdraft transactions that went into effect in 2010, could lose even more from legislation that is making its way through Congress.
The Durbin Amendment of the Dodd-Frank Act is proposing to cap interchange fees – what banks can charge merchants for debit card transactions. Up until now it has been 44 cents per transaction; the new cap would be only 12 cents per transaction, resulting in a loss of billions of revenue for banks. The Dodd-Frank Act was meant to protect consumers, but more than likely it will create some unintended consequences. The banks will have to make up for this loss – meaning us, the consumer, will have to pay more.
Financial institutions have warned that such a measure would trigger higher fees on basic banking products, as well as loss of reward programs tied to debit card use. It isn’t clear if new fees under consideration will make up for the lost revenue as a result of the new regulation, but banks won’t be waiting around to find out. So expect to see some new fees for what used to be free.
The good news is that many credit unions and small banks continue to offer free checking. In fact BankRate.com just released a survey showing 39 of the 50 largest credit unions have free checking with no strings attached, and about half of them don’t even require a minimum balance. Their ATM fees are, on average, half of traditional banks fees and one quarter of the large credit unions charge no ATM fees at all.
Happy Spring everyone!