Is there such thing as free checking anymore? Well, that all depends on how you define "free."
An increasing number of big banks such as Bank of America and Wells Fargo are doing away with traditional free checking offerings and introducing new set-ups that require customers to meet certain conditions before account fees are waived.
Technically free? Yes. But what happens if customers don't meet the conditions? Well, then they'll have to pony up cash for monthly fees that could be in the $15 range, adding up to $115 a year on average, according to Stephanie Wei of personal finance site NerdWallet.
But just because the banking industry heavyweights are phasing out affordable checking doesn't mean your only choice is to start stashing your cash under your mattress. A host of other banking options exist for consumers if they're wiling to break ties with the big banks, experts say.
"Free checking will certainly exist, but no longer at big banks," says Dan O'Malley, founder and CEO of PerkStreet Financial, an online banking institution. "Big banks are flushing free checking down the toilet, so if you don't want to pay fees, you're going to have to look elsewhere."
"Elsewhere" is credit unions, community banks, and online banking institutions, Wei and O'Malley say, all of which are expected to see tremendous growth over the next decade.
Nine of the top 10 credit unions with open membership ranked by NerdWallet offered free checking according to Wei. Online institutions, which don't have costly branches or other related overhead costs, can pass savings along to consumers, in some cases actually paying customers to use their checking accounts instead of charging them.
"Online institutions have far lower costs," O'Malley says, adding that banks spend nearly $800 per family a year on branch locations.
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But making the jump to completely online banking might be daunting to some Americans, who might be used to the convenience of nationwide locations and accessible ATMs. Nevertheless, more Americans are coming around to the idea of banking with smaller banks or online institutions, O'Malley says.
"Remember that 10 years ago, people used to wonder if they bought something on Amazon.com and had a problem, what they would do," he adds. "Now everyone realizes you don't have to walk into a store when you want to buy something. That same thing is happening in banking right now."
O'Malley says about 18 percent of Americans currently bank with a so-called "direct bank"—an institution without branches—but he expects that figure to jump to more than 50 percent over the next 10 years as the traditional big banks begin pulling back on the perks they offer to customers. O'Malley has already seen interest spike up at PerkStreet just over the past 6 months.
Interested in what the best options are for free checking? Check out this post for more details.