What's more annoying than the vuvuzela, the South African horn that has become the soundtrack for this year's World Cup?
Probably nothing. But checking account fees come pretty close.
It's been years since consumers have had to worry about checking account fees. Most financial institutions have offered free checking, even to customers with small balances. They were able to do this because fees from other services, such as overdraft coverage, helped subsidize those accounts.
Now, though, revenue from those sources is disappearing. New federal regulations that take effect this summer will prohibit banks from charging overdraft service fees unless customers sign up for it in advance. Early indications are that most customers would rather have debit card purchases declined than pay a $35 overdraft fee. Banks and credit unions earned nearly $39 billion from overdraft service fees in 2009.
Financial institutions also face a decline in revenue from "interchange fees" — fees retailers pay banks when customers pay for purchases with debit cards. The financial overhaul bill up for a vote in Congress this week directs the Federal Reserve Board to draw up regulations that will result in "reasonable and proportional fees" for debit card transactions. No one has defined what that means, but retailers — who lobbied vigorously for the change — believe it will lead to lower fees. U.S. merchants pay more than $20 billion a year in interchange fees on debit cards.
That means banks are looking elsewhere for revenue. Some, such as Wells Fargo and TCF Financial, have already disclosed plans to start charging fees to customers who don't meet specific balance requirements. Fortunately, the financial-services business is competitive, so you have choices.
Consider opening an account at a credit union. Thirty-nine of the 50 largest credit unions offer free checking, according to a recent survey by Bankrate.com. Of those, only three require members to maintain a minimum balance to avoid a checking account fee.
Credit unions are non-profit organizations, and you have to be a member to join one. But that's not that difficult: You may be eligible based on where you
- USA Today
