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The Death Of Free Checking Is A Myth

An open checkbookFree checking is dead (almost, at big banks anyway). Long live free checking (at small banks and credit unions)!

You can be forgiven if you believe fee-free accounts have gone extinct, but dozens of smaller institutions are out to show that the death of the free checking account has been greatly exaggerated.

This month, 65 credit unions and community banks — from Alabama to Arizona and Ohio to Oregon — signed a Declaration of Free Checking to promote their accounts.

Those taking part are members of the Kasasa network. This communal brand idea was established in 2009 as a means for credit unions and community banks to compete with big banks by offering better interest rates on checking and savings accounts, says Gabe Krajicek, the chief executive behind the brand.

Kasasa accountholders need to meet rewards checking requirements, such as using their debit card a certain number of times each month or signing up for eStatements, to earn top rates.

Each financial institution can set its own rates, which can still top 3.00% APY for checking accounts and 1.00% APY for savings accounts. They’ll also typically refund ATM fees.

But the efforts of these small institutions aren’t unique.

In its report, “Big Banks, Bigger Fees: A National Survey of Bank Fees in 2012,” the U.S. Public Interest Research Group found more than 60% of small banks and credit unions still offer free checking.

It’s a dying practice at big banks, where just one-quarter offer totally free checking. However, nearly 60% offer it if you have a direct deposit regularly land in your account.

Chart displaying big bank checking account feesWhile checking fees are prevalent, they aren’t cheap, with the median fee reaching $12 a month, a Pew Charitable Trusts study, “Still Risky: Bank Fees and Disclosures in the States,” found. It takes an average daily balance of at least $2,000 to get the fees waived, according to the study by the Pew Charitable Trusts, which examined the 12 largest U.S. banks.

Free checking can be found at a broad range of local financial institutions, from Suncoast Schools Federal Credit Union in Tampa, Fla.,(, one of the largest credit unions in the country, to Washington Savings Bank (, a local bank in Lowell, Mass.

Since Kasasa’s launch, member financial institutions have paid $76 million in interest and $8 million in ATM refunds, Krajicek says.

David Krause, chief executive officer of Pioneer Bank ( in Mankato, Minn., sees Kasasa as a win-win for consumers and the bank. “We ask consumers to do a few things for us, and in return we want to do a few things for them.”

By signing up for eStatements, the bank saves the cost of preparing and mailing statements, and by using debit cards, the bank earns interchange fees, which a merchant pays to the credit card company as a fee for accepting credit cards.

Kasasa member financial institutions are far from alone in offering these kinds of accounts. But it often takes time and effort to track them down in your local market.

“Consumers don’t switch (from accounts with fees) because they don’t realize there are better options,” Krajicek says.

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  1. said:
    on July 20th at 01:22 pm

    I am a member of a couple of credit unions and both of them still offer 100% free checking. People have to understand that there are still times when you need physical check to complete transactions. They provide a receipt of a transaction occurring and have to be deposited by the person receiving the money. I don’t think the need for doing this will ever really go away completely.