Wall Street Journal ran an article by reporter Robin Sidel End Is Seen to Free Checking a week ago. Over the weekend, it published another article by the same reporter The New Bank Fees: How to Fight Back. Both articles said because new rules from the government will reduce banks’ revenue from overdraft fees and possibly debit card interchange fees charged to the stores, banks will stop offering free checking accounts.
I have two comments. The first one is:
Why should a checking account be free?
A checking account is a service provided by the banks. The service costs money to produce. There’s no reason it must be given out for free.
Free checking has been subsidized by overdraft fees. People on tight budget or those who don’t watch their balance carefully pay a much bigger share of the cost than others. That’s not fair, is it? The cost should be shared more equally among all customers. If that means there has to be a monthly fee, so be it.
My second comment is:
A checking account wants to be free.
That of course is a parallel to a famous declaration about information. While there might be an end to checking accounts absolutely free of any strings, I don’t see how the vast majority of customers will ever pay a monthly maintenance fee for their checking account.
The reason? Competition. A checking account is a commodity. There are more than 8,000 banks plus over 7,000 credit unions in this country. Someone, somewhere, will offer a free checking account for customers who refuse to pay a monthly fee. The incumbent banks know it. Therefore they will offer a way to make their checking account free: keep a minimum balance, open a savings account or CD, use online bill pay, use the debit card, get paperless statements, etc., etc.
When all is said and done, there will still be free checking. Don’t worry; it will not end.