First Clue That a Checking Account Isn't Free

With deposit rates so low, the last thing we need are account fees that eat away at our savings. If you prefer to stay with the megabanks, you'll have to pay special attention to ensure you don't get hit by new fees. Banks are blaming the new regulations as the reason more fees are being added.

Many of the large banks like to say they still have free checking. But how does one define free? A Wells Fargo spokesperson interviewed by the Clarion-Ledger gave her opinion about free:

"It's misleading in a way to say we don't have free checking anymore," she said. "There are lots of ways to get a free account."

Banks have to be careful about what they officially label as "free checking". According to the FDIC consumer news (from Summer 2010):

Under Federal Reserve Board rules, an institution can't advertise a "free" checking account if you could be charged a maintenance or activity fee (such as for going below a required minimum balance). But your bank can offer a free account and still impose charges for certain services, such as check printing, ATM use or overdrafts.

Thus, if you have to maintain a minimum balance or direct deposit to avoid a monthly fee, it cannot be advertised as a free checking account.

So the first clue that you may have to worry about monthly fees is if your bank changes the name of your checking account. An example is at Chase Bank. Former WaMu customers who had WaMu's free checking had been converted over to Chase Free Extra Checking. Recently, these customers were sent letters from Chase informing them that this account was being converted over to Chase Total Checking in February 2011. As you can see, there's no mention of "free" in the new checking account name. The reason is that it will require customers to either maintain a minimum balance or direct deposit to avoid a $10 to $12 monthly fee.

Some banks are grandfathering in free checking account customers, at least for now. Wachovia customers in states that were converted over to Wells Fargo had their free checking accounts preserved. However, new Wells Fargo customers will have to worry about monthly fees. The checking account that's closest to a free checking account is the Wells Fargo Value Checking. Note, there's no "free" in the name. To avoid a $5 monthly service fee, you'll need either a $1,500 minimum balance or direct deposit of at least $250.

Bank of America is smart enough to know it's best not to include "free" in their checking account names. It makes it easier to add fees in the future. That was the case with the MyAccess Checking Account. This used to be a free checking account when opened online. Now the monthly service fee is waived only if you maintain a $1,500 balance or maintain direct deposit. The new eBanking checking account is closest to a free checking account. It doesn't require a minimum balance or direct deposit. To avoid monthly fees you'll just have to stick with ATMs for all deposits and withdrawals and receive online statements. If you use a teller to make a deposit instead of an ATM, a monthly fee applies. Thus, it's officially still not a free checking account by the Fed's definition.

Some regional banks are also converting their free checking accounts. Readers have been notified by BB&T Bank that their free checking account will be converted into the BB&T Bright Banking account. Note the lack of "free" in the name. To avoid a $10 monthly fee, you'll need either a minimum balance or direct deposit.

Citizens Bank's Green Checking used to be a free checking. Now it requires a $1,500 minimum balance requirement or 5 qualifying transactions per month to avoid a $4.99 monthly fee.

Finding Free Checking Accounts

You can find free checking accounts at credit unions and community banks that offer reward checking accounts powered by BancVue. It's easy to forget that these reward checking accounts are free since they include monthly requirements like debit card usage and direct deposit. However, those requirements are only to qualify for high interest rates and ATM fee reimbursements. Even if you don't meet those requirements, the checking accounts are free. There's never a monthly service fee. However, not all reward checking accounts are free. There are some reward checking accounts that are not powered by BancVue that do have monthly fees. One example is MB Financial's MB Red Checking account. You have to maintain a $500 minimum balance to avoid a $10 monthly service fee.

Another option is an internet bank like Ally Bank, ING Direct and USAA Bank. Ally Bank not only has no monthly service fees, it offers free paper checks and reimburses all ATM surcharges.