Bank of America: Free Checking May Become Fee Checking

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When Bank of Americadecided last year to limit their charges for overdrafts, and thus curtail the $160 million per quarter they were raking in with overdraft fees, you knew there would be a catch.

Now bank customers are gaining some clues as to how Bank of America will recoup the money lost from the overdraft fees, as well as other potential restrictions coming as a result of financial reform legislation.

The bank is currently testing some pricing models that would curtail its free checking program in various ways. The end of free checking at Bank of America may look something like these new service fee models – all of which are under review at the banking giant:

  • A monthly maintenance fee for individual checking account customers.
  • Pushing customers toward online accounts (The Wall Street Journal reports that Bank of America may cut checking account service fees if customers use less expensive services like direct deposit and paperless statements.)
  • A “free pass” for checking account customers who meet monthly minimum checking account balance requirements. If not, a fee will likely apply.
  • A pass for customers who use the bank’s credit card.

It’s all about value – especially the value customers place on certain banking services, Bank of America says.“Each offering provides a distinct value, and there’s a cost that comes with that value,” explains Bank of America spokeswoman Anne Pace. “Customers will have more choices in how they want to pay for that value.”

Bank of America hasn’t come out and said how much they’ll charge low-volume checking account customers, although the WSJ estimates that new charges should be in place by 2011. But most banks that do charge such fees tend to come in anywhere between $5 and $10 per month.

A 2009 study of 195 financial institutions by MoneyRates.com reports that the average checking account maintenance fee was $5.90 in December of 2009, down from $6.63 in July, 2009. But the average balance to avoid triggering such a fee actually rose 7.85% from July, 2009 to the end of the year – from $4,284 to $4,621. So one way or another, bank customers may be looking at a new terrain where checking account fees are a fact of life.

Other banks are expected to follow suit. While banks aren’t claiming that free checking will go away, a new, multi-tired model seems to be rising from the ashes of the old checking account system – one where the motto seems to be “the less you do for us, the more you’ll pay in checking account fees.”

It’s a new era in banking, one where it’s definitely not your father’s checking account.

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