Finance

The End Of Free Checking

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Bank of America is planning to get rid of its basic free-checking account, this morning's WSJ reports. Other banks may follow suit.

It costs banks a few hundred bucks a year to maintain a customer's checking account. Banks have been able to make that up (and more) largely by charging overdraft fees.

But new federal rules mean banks can only charge those fees to customers who sign up for overdraft protection.

B of A is getting rid of many of its fees. And banks that aren't getting rid of them altogether will likely see a big drop in the amount of money they make from fees.

People who are profitable to banks in other ways — who keep big balances in their checking account, use a bank's credit card, or do other business with the bank — will still be able to find free checking.

"Customers will have a choice," said one B of A exec quoted by the WSJ: "Bringing more relationships to us or paying a maintenance fee."

In recent years, free checking accounts have attracted many people with low incomes into the banking system for the first time. But they haven't always been the norm.

It was common for banks to charge for basic checking in the 1980s, the WSJ notes, in part to make up for the high interest rates they were paying on savings accounts at the time.

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