More than 4 million accounts have already moved away from the nation’s largest banks and this trend will only increase according to Moebs Services, an economic research firm in Lake Bluff, IL. Previously, large banks with over $50 billion in assets held 45% of the 130 million consumer checking accounts in 2009. That number has been decreasing dramatically with Bank of America losing 400,000 accounts in 2010 alone.
This trend will only continue, according to Michael Moebs, CEO of Moebs Services, who predicts an additional 7 to 9 million accounts moving by the end of 2011. The trend should plateau in 2012 after the nation’s largest banks see between 13 and 17 million accounts moving to local community banks and credit unions in just three short years. If Moebs’ predictions come to fruition, the largest financial firms will only hold a third of all free checking accounts in the US by the end of 2012, a huge drop from the 45% they held in 2009.
Read more: Huffington Post
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.