citibank - Free Checking Information

The Free Checking Watch List

February 17, 2012 by Mike Leave a Comment

Since last fall, some banks have said they have no plans to change their policies, but a number of others have modified their policies on which customers qualify for free checking. We can bet that other changes are in the works. The most likely reason for the new, stricter policies is that banks are hoping checking account fees will help offset the loss of extremely profitable overdraft fees and the possible loss of other lucrative revenue sources.

Late last month, Senator Charles E. Schumer of New York asked the Federal Reserve to “ensure that banks are allowing customers enough time and notice to understand and prepare for the new fees.”

Meanwhile, to help consumers sort through the changes, we reached out to a number of the big banks to identify which have changed or are changing their free checking policies. We call them out in our free checking account watch list below.

Wells Fargo
Citibank
Fifth Third Bank
Bank of America

Continue Reading at Bucks, New York Times

Small Credit Union Takes on Mega-Banks over FREE Checking

February 18, 2011 by Mike Leave a Comment

Here’s a story that’s almost too good to be true. It’s your classic David versus Goliath story.

Instead of sitting back and remaining silent as the big mega-banks attempt to destroy the free checking account while adding new and higher fees to all checking accounts, the Long Island-based Bethpage Credit Union is taking action.

Not only did the credit union introduce its own free checking account last year, it recently launched a new website www.freecheckingforlongisland.com where consumers can go and voice their outrage over the actions of the mega-banks as they snatch free checking from the hands of their customers.

While on this site you can also learn more about the credit union’s new free checking account – Bonus Checking. Why they didn’t name it Free Bonus Checking or Bonus Free Checking is beyond me but at least they are aggressively promoting it as free checking.

Better yet, you can earn interest on your free checking account if you agree to online statements, direct deposit, and using your debit card at least 15 times each month. All of these requirements should be no-brainers for most customers.

According to the folks at Bethpage, “The demand for a free checking account is high on Long Island.” This should come as no surprise to those of you familiar with Long Island. This is Citibank territory – one of the four mega-banks responsible for attempting to bring about the end of free checking.

Apparently, the Bethpage free checking campaign is working as it has opened more than 33,000 free checking accounts since the middle of last year. That’s a tremendous jump in market share for a small credit union.

Let this be a lesson to all the community banks and credit unions across the country. It is possible to take on the mega-banks and win when it comes to free checking.

These mega-banks have handed you a golden opportunity to grab thousands of their disgruntled customers and make them your customers by simply aggressively promoting the fact that you offer free checking and plan to do so for years to come.

Now’s not the time to sit back and do nothing – to hoard your precious marketing dollars for better times ahead.

Please, take advantage of the turmoil in the checking account market and launch your free checking campaign today. As you can see – it’s paying big dividends for the folks at Bethpage Credit Union.

Some Truths About Free Checking

February 15, 2011 by Mike Leave a Comment

Attention financial writers – many of the articles over the past year about the pending death of free checking are based on erroneous information.

One of our goals with this site dedicated to the free checking account is to provide the truth about free checking. As a financial writer we trust you’ll visit this site when writing any articles about free checking or when free checking is mentioned. Should you have an inquiry that cannot be answered by one of the many articles on this site, please contact us immediately and we’ll provide the information to the extent possible.

As for information we’ve encountered in recent free checking articles, here are some examples of information that is wrong or misleading:

The free checking account is on its way out, it’s dead.
The free checking account was created or started by a major bank in Minnesota.
The free checking account is unprofitable.
The mega-banks have been offering free checking for years.
Free checking was started by the big banks.
Free checking attracts only the lower income consumer who keeps a low balance.
Banks can’t survive if they continue offering free checking.
Banks have to drop free checking because of loss of overdraft fee income, a reduction in debit card interchange fees, and predicted high compliance costs as a result of the Dodd-Frank legislation.

None of the information above is even remotely correct and should not be used when writing articles and blogs about the free checking account.

Free Checking is Alive and Well

About the only banks dropping free checking are the four mega-banks – Wells Fargo, Bank of America, Chase, and Citibank. Unfortunately, because of their combined market share and nationwide coverage, their actions dominate the media. Occasionally, another smaller bank will follow along because of the lemming instinct – if the big banks are dropping free checking, it must be the right course of action.

What isn’t being reported in the media are the thousands of smaller community banks and credit unions still offering free checking. Most of institutions have no plans to drop free checking – especially now. They now have a stronger competitive advantage over the mega-banks operating in their market areas.

The Free Checking movement was launched in 1982 in Lincoln, Nebraska

Free checking as we know it today started in Lincoln, Nebraska in 1982, with the launch of the Totally Free Checking and Free Gift marketing program. It was not a bank or credit union that created this unique account or marketing program – it was a direct mail vendor that specialized in marketing campaigns for small banks. So, in effect, free checking had its origins at hundreds of small, community banks across America.

It wasn’t until the late 1990s that the four mega-banks and other large banks began offering free checking. And they did so strictly as a competitive or defensive move. They were among the last banks to offer free checking and first banks to drop it.

The Free Checking Account is Profitable

Free checking is profitable for the thousands of community banks and credit unions that continue offering it. There are two primary reasons for this:

They don’t have the prohibitively expensive branch networks like the mega-banks with their thousands of branches spread across America. The reason free checking isn’t profitable for the big banks is that they allocate these massive branch costs to their checking accounts using the overhead allocation model. In reality, these mega-banks shouldn’t be allocating much, if any, branch costs to their checking accounts. Why? Since the first ATM was deployed in 1969 at Chemical Bank, the big banks have been employing a combination of new technology and punitive pricing (charging customers to use the branch to make a deposit) to keep checking customers out of the branches. The Internet has made visiting the branch obsolete for most checking customers. So, if checking customers are no longer using branches, why should their accounts absorb the overhead costs for them? These fixed costs should be allocated only to the accounts still requiring branches – like CD’s, safe deposit boxes, loans, and investment services.
By using a different cost allocation model, smaller community banks and credit unions look at adding new checking accounts from a marginal cost perspective – not the “all in cost” perspective of the big banks. Since almost all community banks and credit unions have unused branch capacity and small branch networks, their fixed costs are basically static. So, the revenue from a new free checking account needs only be sufficient to cover variable costs. Any excess revenue can then be applied to the fixed cost base – thereby driving down the fixed cost of all accounts. On the other hand, like the mega-banks, these smaller banks and credit unions shouldn’t be allocating costs to checking accounts when so few checking customers use branches to transact business.

Free checking accounts have been profitable for the community banks and credit unions since they began offering this account in the early 1980s – long before today’s high overdraft fees and lucrative debit card interchange fees. So, it’s disingenuous for today’s mega-banks to claim that recent government meddling in the pricing of overdrafts and interchange fee amounts has made free checking all of a sudden unprofitable.

Remember, the mega-banks didn’t begin offering free checking until they realized the account was wildly popular – even among the wealthy – and wasn’t going away. But, with the recent federal legislation, these big banks saw an opportunity to launch a campaign about free checking profitability in the hopes of forcing the smaller banks to drop this competitive account.

“Free checking is unprofitable and will soon be dead,” is the perfect media story to achieve the mega-banks’ ultimate goal of killing the free checking account. If they can’t have it – they don’t want their competitors having it either. And the mass media had bought into this “big lie” hook, line, and sinker.

The Mega-Banks were the Last to Offer Free Checking

As stated above, the community banks across America were the first banks targeted for the Free Checking and Free Gift program introduced in Lincoln, Nebraska, in 1982. Free checking got a major boost by Washington Mutual (WaMu) when it began its massive expansion program in the Pacific Northwest during the 1990s and into the new century – ultimately expanding to other states around the country. WaMu’s primary marketing focus was on its free checking account. It basically owned the free checking market in the communities it served.

It wasn’t until the late 1990s that the mega-banks reluctantly added free checking to their checking product line. And then, they did very little marketing of the account. Perhaps the most aggressive free checking marketer was Bank of America with its online banner ads. Adding free checking was primarily a defensive move to protect themselves from the aggressive free checking marketing conducted by the community banks and credit unions in all markets where the mega-banks had branches.

We saw how quickly senior management at Chase Bank dropped WaMu’s free checking account shortly after acquiring the bank as a result of the near collapse of our economy. This was done after first promising these customers that Chase would retain free checking.

Blaming this move on recent government legislation is simply a classic example of employing a red herring.

The Truth About Free Checking Can Be Found Here

In the future, should you be writing a blog or media story about free checking, you should consider interviewing senior management and marketing people working for one of the many community banks and credit unions offering the free checking account. They can tell you the true story about free checking and why it is so important for their success.

In addition, you should definitely contact one or both of the financial services vendors specializing in free checking marketing programs. Both are headquartered in Lincoln, Nebraska. One is ACTON Marketing and the other is Haberfeld Associates. Both have been in the free checking business since the early 1980s. They are the true experts when it comes to free checking profitability.

Check it out – There’s a Bank or Credit Union Offering Free Checking in Your Neighborhood

February 8, 2011 by Mike Leave a Comment

ATTENTION CONSUMERS: Not all free checking accounts have the word “free” in them. Yes, I agree it doesn’t make sense for a bank or credit union to offer a free checking account yet call it something other than free checking.

But, this is exactly what the two hottest online banks have done.

The free checking account at Ally Bank is called Ally Bank Interest Checking. And it’s free. In fact, it’s better than free as you’ll discover below.

The free checking account at ING Direct goes by the name of Electric Orange Checking. And, it, too, is a free checking account.

What this means is that you’ll have to work a bit harder when searching for a new bank that offers you free checking.

If you’re one of the many consumers whose bank has betrayed you by eliminating your free checking account, you are probably fed up to the point where you want to find a new bank. You want to fire your old, mega-bank and take your business elsewhere.

Well, join the club.

But just remember, today you’ll have to look beyond the account name to determine if it is, in fact, a true free checking account.

Of course, like most things in life, there are some shortcuts to help you in your search. Here are 7 shortcuts you may find useful:

First, stay away from the four big mega-banks of Citibank, Chase, Bank of America, and Wells Fargo. They were late comers to the free checking world and are now the first to abandon this account. Contrary to what they might tell you, they put their interests ahead of your interests. Of course, most of you know this by now.

Second, immediately consider becoming a customer of a smaller community bank or credit union in your neighborhood. These guys were the first to offer free checking in the early 1980s and most still offer it today. They tend to put your interests before their interests.

Third, decide whether or not you prefer to bank with an online bank or need a local bank or credit union with brick and mortar branches. If you prefer an online bank, your selection process is extremely easy. If you qualify to bank with USAA, you can add this bank to the Ally Bank and ING Direct choices. A quick Google search of “online only banks” will turn up a few more candidates for your consideration.

Fourth, if you prefer a brick and mortar branch in your neighborhood or near where you work, make a list of local community banks and credit unions in these areas and go online and check their website listings for checking accounts. Most bank and credit union websites present their menu of checking accounts in a comparison chart format. Remember, their free account may not be called free checking.

Fifth, ask your friends, co-workers, and family members if they have free checking and if so, where do they have their account. And don’t forget to ask about the service they receive.

Sixth, if you are a member of the website Angie’s List or a similar site, checkout what others are saying about free checking and the banks and credit unions in your area. Check out Yelp to see what people are saying about a particular bank or credit union in your area.

Seventh, make a free checking inquiry on the website www.bankrate.com. This is a great “go to” site for information on banking products.

While searching for the best bank or credit union free checking account, you may encounter one or more accounts with names like the four shown below. Rest assured, with very minor exceptions, all are free checking accounts.

Totally free checking
Free interest checking
Free checking
Rewards checking

Totally free checking is a name that continues to be used by a number of community banks and credit unions. This was the original name for free checking when it was first introduced in 1982. Most banks and credit unions have shortened it to free checking.

Free interest checking is often the name used when a bank or credit union enhances its free checking account by paying interest on the balance in the account. Other banks use names like VIP Interest Checking and 50+ Checking on some of their free checking accounts.

Rewards checking accounts are almost always free checking. You earn a higher rate of interest on the balance in the account as the bank or credit union includes the balances in all of your deposit accounts in your rewards account. In addition, to earn interest monthly you must meet the activity criteria for your rewards checking account. Generally this requires using your debit card a certain number of times each month. You can see a list of the highest yielding rewards checking accounts at http://www.depositaccounts.com/checking/reward-checking-accounts.html.

In addition, there are other free checking accounts that fall into two categories we call:

Unnamed free checking
Stealth free checking

As mentioned above, online banks like Ally Bank and ING Direct offer free checking but don’t use the word “Free” in the account name. There are other banks and credit unions that do the same thing. This means you must verify whether or not the checking account has no monthly service fee or minimum balance requirement. Generally, this is easy to do when viewing the checking account comparison charts presented on most bank and credit union websites.

Our latest category of free checking accounts is called “Stealth free checking.”

Based on the federal government’s definition of free checking, these stealth free checking accounts cannot legally use the word “free” in their name.

Why?

Because these accounts, like eBanking and MyAccess from Bank of America and Chase Total Checking from Chase Bank have a monthly service charge and may have a minimum balance requirement attached to them.

Yet, you can AVOID having to meet the minimum balance requirement and AVOID the monthly service fee simply by using your account each month as required by the bank.

For example, while Chase Total Checking has a $12 monthly service fee, it is easily avoidable by simply establishing a monthly direct deposit of $500 or more. A less desirable option is to avoid the fee by maintaining a $1,500 minimum daily balance. Consumers seeking free checking should avoid Chase Total Checking unless they are easily able to meet the simple direct deposit requirement.

Still, legally, these stealth checking accounts do not meet the government’s requirement for being called or labeled free checking.

They are only free if you meet the monthly activity requirements.

On the other hand, there is no reason to choose a stealth free checking account offered by one of the four big mega-banks when you can get a truly free checking account with no strings attached at many community banks and credit unions in your neighborhood.

Just remember, the free checking account is alive and well and readily available at most of the community banks and credit unions in your neighborhood. With a little research effort, you should be able to find a free checking account to replace the one you had at your neighborhood mega-bank branch.

At Many Big Banks, No More Free Checking

February 4, 2011 by Mike Leave a Comment

Reversing a trend that began in the mid-1990s, big banks are imposing new fees on their least-profitable customers — those who want just a bare-bones checking account.

Those who can’t maintain fat balances, or who don’t use other services that would make them more lucrative to a bank, probably will need to cough up about $100 a year if they want to stay put.

The country’s four giant banks — Bank of America, Wells Fargo, JPMorgan Chase and Citibank — are already phasing in the charges, and large regional banks are expected to follow suit.

The upshot: If you’re not prepared to stockpile cash in a checking account, be prepared to pay a monthly fee or to take your money to a smaller bank.