Banks are threatening to end free checking. Don’t panic

Most banks offer free checking if, for instance, customers have their paycheck direct deposited or they maintain an average minimum balance.

Most banks offer free checking if, for instance, customers have their paycheck direct deposited or they maintain an average minimum balance. The majority of people with checking accounts (73%) take advantage of the option, according to a 2023 Bankrate.com survey. But if regulatory costs go up for banks, free services like checking may go away, at least if they follow Chase’s lead. Marianne Lake, the head of Chase Bank, told the Wall Street Journal last week that Chase might stop offering free checking and other free banking services. “Consumer banking is predicated on banks providing services for free to consumers such as checking accounts, debit cards and electronic bill paying. The model then relied on banks being able to recoup those costs elsewhere in the consumer banking business, such as with debit interchange fees, overdraft fees, late fees and higher interest rates,” Jaret Seiberg, financial services analyst at TD Securities, wrote in an analysis of Lake’s comments. The Consumer Financial Protection Bureau, for instance, has finalized a rule that caps credit card late fees at $8. However, it is not in effect yet because it is being litigated. The CFPB also has proposed that banks be limited in how much they can charge customers in overdraft fees. Separately, the Federal Reserve is expected to further limit how much banks can charge merchants when customers use their bank debit cards to make a purchase. While banks — especially smaller ones trying to attract deposits — may still have to offer incentives to bring in customers, one consumer advocate doesn’t see customers running for the exits if their bank does in fact impose a fee on their checking account at some point in the next couple of years.