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DAVID GREENE, host: Big banks are making money from new fees on everyday checking accounts. But most banks are not big banks. And many smaller community institutions are still offering free checking for as long as they can. They're hoping to lure customers who are disgruntled with those bigger institutions. Blake Farmer of member station WPLN in Nashville reports.

BLAKE FARMER: The news from banks like Regions and SunTrust is arriving in mailboxes across the country.

JAMES MILLER: Well, let's see what we got.

(SOUNDBITE OF MAILBOX CLOSING)

FARMER: Big banks are putting in writing what customers like James Miller of Nashville have heard was on the horizon for a year or more: Your free checking account is about to cost you. The research firm Moebs Services found two-thirds of the country's largest banks no longer offer free checking.

MILLER: You get a letter like that, and you finally just get to the point where it's like, yeah, it's only $3 a month, but jeez-freaking-Louise, it's $3 a month every couple of years, you're changing something and taking stuff away.

FARMER: Miller, a musician and graphic designer, marched his business from Wells Fargo to a community bank across the street, where checking accounts are still free. Smaller institutions see a window of opportunity with people like Miller. Tennessee-based Southeast Financial Credit Union is putting up billboards and sending out letters that proclaim free checking is alive and well. Lisa Reitmeyer is the vice president of marketing.

LISA REITMEYER: This is when it's happening. This is when it's important and a hot issue to people. So this is when we need to let people know. You know, before, everybody had free checking.

TIM AMOS: It may be free to the customer, but it's not free to the bank that offers the service. Somebody is paying for the service, and always has been.

FARMER: Tim Amos with the Tennessee Bankers Association says for years, debit card fees charged to merchants paid the way for checking accounts. But the recently passed financial reform bill cuts those fees by half, starting October 1st - at least for the big boys.

AMOS: Remember, it only applies, though, to banks over $10 billion in assets, which is certainly all of the larger banks, but it doesn't apply to those banks under $10 billion in assets, which is the vast majority of banks.

FARMER: Amos says maintaining higher merchant fees for the time being helps community banks keep free checking around. But in some ways, they can't afford the risk of raising fees like big banks can. Southeast Financial executive John Jacoway says it would be much harder to recover if customers leave in droves.

JOHN JACOWAY: We're not able to go out and get any person walking down the street to become a member of our institution. We're not on every corner across the nation. So each person, each member, if you will, is much more important.

FARMER: If community bankers can steal some unhappy customers from larger institutions, Sam Allen says they can make free work. Allen is with Renasant Bank out of Mississippi, which has been promoting its no-charge checking.

SAM ALLEN: By generating more good, core checking accounts, that's how we can generate additional fees for the bank.

FARMER: A survey by Bankrate.com shows most Americans are willing to walk over new fees. Some will take their money to community banks. Others are going to extremes. Waiting at a Nashville bus stop, Karen Rowlette says she scrapped Bank of America, and now has her paycheck deposited to a pre-paid Wal-Mart card.

KAREN ROWLETTE: Yeah, and in today's recession, every little bit counts, you know.

(SOUNDBITE OF LAUGHTER)

FARMER: And you're telling me you've closed all of your bank accounts?

ROWLETTE: I've closed every single one of them. Yes.

(SOUNDBITE OF LAUGHTER)

FARMER: With all the new nickel-and-diming, Rowlette says cash might even make a comeback. For NPR News, I'm Blake Farmer, in Nashville.

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