by Broderick Perkins
DeadlineNews Group
(9/8/2011) Erate Exclusive - The free checking account industry is
entering the Ice Age.
The number of banks offering free checking accounts dropped 11 percent in
the last year, according to a national study of 2,265 financial institutions
by Moebs Services, an economic research firm in Lake Bluff, IL.
Smaller institutions are a better source for freebie checking.
Moebs' study reveals 72.5 percent of institutions surveyed were offering
free checking accounts, compared to 83.5 percent that offered them a year
ago.
Regulatory reform, economic malaise and a general move by banks away from
anything that's free are among the reasons, according to Moebs.
"They are also making greater use of e-statements and direct deposit to
cut costs," said Mike Moebs, economist and CEO of Moebs Services.
"Sixty-three point six percent of Wall Street banks offer free checking
in 2010, compared with 92.6 percent in 2009. In contrast, community banks
use of free checking declined to 71.7 percent from 78.3 percent, while
credit unions fell to 73.4 from 89.3 percent," Moebs said.
Credit.com says banks are willing to sacrifice
customers because checking accounts don't pay the bills. New regulations
limiting revenues from debit cards (typically attached to checking accounts)
and other rules restricting how much banks can charge for overdrafts and other fees,
reduce big banks' ability to afford free services.
Consumers who want free checking are better off checking out smaller
institutions.
The number of credit unions offering free checking accounts increased by
5.1 percent over the last year, Moebs found, while the number of community
banks offering the service declined by just one percent.
'Community banks and credit unions are welcoming the millions fleeing"
the big banks, Moebs says.
"This is a big opportunity to gain market share for the friendly Main
Street financial institutions," he added in a report by Credit.com.
Moebs shows a trend toward simplification of checking accounts with
institutions reducing the number of checking account offers to interest
checking and non-interest checking.
"Now is a good time to shop for a checking account, but consumers need to
do this wisely looking for the best deals which appear to be with the Main
Street Institutions," Moebs said.
Community bankers see free checking as an opportunity to separate their
meme from the "Too Big to Fail" crowd.
Moebs Services surveyed more than 2,500 banks and credit unions in June
2011 and found that only 34.6 percent of banks with at least $50 billion in
assets still offered free checking, down from to 96% at the end of 2009.
But almost 71 percent of smaller banks still offered free checking
accounts at the end of June, according to Moebs, off just slightly from
about 78 percent in 2009.
Other Articles:
Americans
prefer to pay down debt rather than save
Short-term
bank loans as expensive as payday loans
Debit
card overdraft fee APRs soar higher than 3,000 percent
Now checking
account banks pull the wool over your eyes
Banks
winning overdraft fee war, consumers losing billions
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