debit cards - Free Checking Information

PNC, Nation’s Sixth Largest Bank, Keeps the Free Checking Account

March 7, 2011 by Mike Leave a Comment

Refusing to follow the lead of the four mega-banks, senior management at Pittsburgh-based PNC Bank announced recently that it will continue offering free checking to its customers. According to the article below, approximately 70% of the bank’s customers have free checking. PNC Bank should serve as a good example for those banks and credit unions that are currently pondering which decision to make as it relates to the future of the free checking account. Banks like PNC have much more credibility than the mega-banks when it comes to doing the right thing for its customers.

The article below by WSJ senior financial writer Robin Sidel first appeared on the WSJ online website on March 1, 2011. It’s the first media story about a big bank refusing to follow the lead of the four mega-banks that have abandoned their free checking customers by eliminating the popular free checking account. With approximately 70% of its checking customers having a free checking account, senior management at PNC decided keeping free checking was the right thing to do for its customers.

“Checking Will Stay Free, Says PNC Bank”

By Robin Sidel
March 1, 2011

“PNC Financial Services Group., bucking a trend that is sweeping the banking industry, is vowing to keep its most-basic checking accounts free of fees.

“The Pittsburg-based regional bank on Tuesday is expected to start notifying its five million checking customers of changes to some of its accounts, which won’t include any new fees. But the free checking comes at the price of other perks: Basic accounts will no longer enjoy debit-card rewards, and non-PNC automatic-teller-machine fees will no longer be reimbursed.

“PNC, the nation’s sixth-largest bank as measured by assets, with 2,470 branches in 14 states and $183 billion in deposits, is the latest bank to overhaul its checking account ahead of a new federal law that restricts the amount banks can charge merchants for debit-card transactions. PNC has estimated it could lose $800 million a year from the new rule, which is set to kick in this July.

“The move by PNC comes as its biggest rivals eliminate the free checking accounts that have been commonplace in banking since the 1990s. Bank of America Corp and J.P.Morgan Chase & Co. are among the banks that have put free checking on the chopping block and are testing a slew of new accounts around the country.

“Many smaller banks and credit unions, which typically offer the lowest-priced accounts, also are considering tacking on fees. TCF Financial Corp., a Wayzata, Minn., bank that paved the way for free checking in 1986 and used ‘totally free checking’ as its slogan, eliminated its free checking account last year.

“PNC is hoping to make up some of the debit-card revenue that will be lost by attracting customers from other banks and driving existing customers to fee-based accounts that offer more products and services, such as better rates on loans.

“So far, customers have shown relatively little sensitivity to fees. A new retail-banking study from J.D. Power and Associates found that while more customers are shopping around for and switching their banks, fees aren’t the primary drivers of their decisions.

“The survey, which is expected to be released Tuesday, found that 8.7% of 4,791 bank customers said.

They had switched their primary banking institutions in the past year, up from 7.7% in 2010. Just 17% of the customers, however, cited fees and rates as reasons for the change. That represents a slight increase from the 16% recorded last year.

“Consumer behavior could change, since banks have only recently implemented new fees as they scramble to deal with the new debit-card rules enacted as part of the Dodd-Frank financial overhaul last year. The Federal Reserve has proposed capping the amount banks can charge merchants for debit transactions at seven to 12 cents, from an average rate of 44 cents.

“The banking industry is fighting the proposal and hopes for a delay or change before it takes effect in July. Bank executives have said the new limits will force them to shift the costs of offering debit-card rewards to customers by adding fees and reducing benefits.

“‘What we don’t want to do in the short run is to punish our customers for something they didn’t have any control over to start with,’ said Joseph Guyaux, who is president of PNC and oversees its retail-banking business.

“He estimated about 70% of the bank’s customers have free checking, saying, ‘going from that to no free checking made no sense for us.’

“PNC said, as of September, it will stop offering rewards on debit cards that are tied to its low-end accounts, including the free-checking account. Other banks, including J.P.Morgan and U.S. Bancorp, are also cutting back on debit rewards because the programs are expensive to maintain.

“In another cost-saving move, PNC will stop its five-year old practice of reimbursing those customers who use non-PNC ATMs for the $1 to $2 typically charged. The bank expects fewer than half its customers will see an impact on their debit rewards or automatic-teller-machine fees.

“PNC says the account changes, which take effect later this month and again in September, include lowering minimum-balance requirements on two of its existing fee-based checking accounts in an effort to encourage customers to move their funds into those products that include more features than a bare-bones account.

“PNC also is planning to introduce a prepaid, reloadable card for lower-end customers in June. Other banks also are introducing prepaid cards for customers whose checking accounts carry low balances, making them less profitable for the bank.

“The bank also has reduced restrictions on its online and mobile bank account to encourage greater use by its mainstream checking-account customers. The product, called Virtual Wallet, previously had been mostly targeted to young adults.”

Checking Isn’t Free At More Branches

February 23, 2011 by Mike Leave a Comment

The nation’s largest banks are testing how much their customers are willing to pay for checking-account services that used to be free.

Bank of America Corp. and J.P. Morgan Chase & Co., the two biggest banks as measured by assets, have begun trying new fees in pilot tests from Hayward, Wis., to Newnan, Ga.

They include an account that charges a $3 monthly fee for debit cards. Another account designed for electronic-only banking charges customers a $12 monthly fee if customers go to a teller for assistance. In the test programs, some bare-bones checking accounts also now carry base fees ranging from $6 to $9 a month.

The new fees, which are limited to accounts for new and prospective customers in the pilot programs, can typically be waived if customers meet certain criteria.

The pilot testing is the latest indication of the push to boost fees as banks scramble to make up billions of dollars of revenue expected to be lost from new federal restrictions on debit cards.

The Federal Reserve in December proposed capping the amount banks can charge merchants for debit transactions at seven to 12 cents, from an average rate of 44 cents. The Fed’s proposal could reduce the revenue banks make from such fees, known as interchange, by 57% to $9.8 billion, according to CardHub.com.

More Banks Are Yanking Free Checking

February 4, 2011 by Mike Leave a Comment

In Bankrate’s 2010 Checking Study, the percentage of checking accounts considered “free,” that is accounts with no monthly service charges and no minimum balance, fell from 76 percent in last year’s study to 65 percent in this year’s study. The drop reverses a steady increase of free checking accounts dating back to at least 2003.

What’s driving this reversal? Two big regulatory changes for banks are at work here, says Greg McBride, CFA, senior financial analyst for Bankrate.com.

The biggest change right now is a new Federal Reserve rule requiring banks to seek a customer’s permission before enrolling them in overdraft protection coverage that temporarily covers purchases at the register in exchange for what’s usually a big bank fee later, says McBride. This rule applies to ATM transactions and debit cards, which will now simply decline a purchase if a customer doesn’t have the funds in his account to cover it and hasn’t opted in for overdraft protection.

Income from debit overdraft fees was a major source of revenue for the banks, $37.1 billion in 2009 alone, according to Moebs $ervices Inc., an economic research firm in Lake Bluff, Ill. That revenue stream will no longer help subsidize the cost of free checking accounts for banking consumers. That’s causing banks to rethink their checking account offerings, says Bert Ely, a banking consultant and principal of Ely & Co. in Alexandria, Va.

“Part of the repricing (of checking account fees) is reflecting what I believe is a reduction in the amount of cross-subsidy that’s available within banks simply because of a drop in overdraft fees,” says Ely. “It’s like squeezing a balloon. The revenue balloon is getting squeezed in places, so to get the same amount of revenue, it’s got to bulge out someplace else.”
Read more: Free checking on the path to extinction? | Bankrate.com

Charging For Checking May Be Risky For Banks

February 4, 2011 by Mike Leave a Comment

This week Bankrate released its 2010 Checking Study, and it turns out a number of banks are phasing out free checking by introducing minimum balances or monthly maintenance fees.

This shift away from free checking may be due in part to new Fed rules requiring customers to opt in for overdraft protection on debit cards and new limits on how much banks can charge merchants for processing debit card transactions. Being that overdraft fees and debit interchange fees are among the largest sources of revenue for banks these days, it’s not unreasonable to expect banks to make some changes to the way they do business.

That said, getting rid of free checking might not be the best way to make up the difference. A recent study commissioned by the financial services firm USAA found free checking is really, really important to consumers.