Stop! Before dropping free checking make sure you are using the proper cost model to determine profitability. If your bank or credit union has already dropped free checking or are considering doing so because you believe the free checking account is unprofitable, you are most likely using the wrong cost model. Most of the industry uses the “allocated overhead cost model” when, in fact, it may be more appropriate to use the “contribution cost model.” Both models are presented in detail in the white paper below prepared by Jeff Platter of Haberfeld Associates.
Read more (PDF): Financial Managers Society and Haberfeld Associates