The WSJ reported today that Bank of America has begun to test a new checking account that charges $4.95 per month but won't allow overdrafts. The account is targeted to low balance customers that won't meet other account balance requirements and who don't want to get caught paying $35 if they mistakenly (or intentionally) overdraft on their account.
The other accounts the bank offers include:
- MyAccess Checking. The monthly maintenance fee of $12 can be avoided by one qualifying direct deposit of $250 or more or the maintenance of a $1,500 daily balance.
- Bank of America Interest Checking. The monthly maintenance fee of $25 can be avoided by keeping a combined balance of $10,000 in a checking, savings, money market, CD, or Merrill Lynch account.
So, compared to these accounts the monthly fee is low but this still continues a trend of many large banks doing away with free checking. In the past, the big banks profited from low balance customers via overdraft fees, but with legislation severely decreasing this profit source, banks are searching for other profit solutions. According to Mike Moebs of Moebs Services Inc., a bank-consulting firm in Lake Bluff, Ill, banks lost on average a little more than a penny for every $1 of checking account assets they held. The reason, checking accounts are transaction heavy and banks now need to support extensive ATM networks, online banking, and large branch networks. Banks offer checking accounts in the hope that they can cross-sell customers on other, more profitable accounts.
The new Bank of America account is being trialed in several states and will be rolled out nationally sometime later this year.
For consumers who don't like the demise of free checking at the big banks, there are other options. Many community banks and credit unions still offer free checking. Some even offer rewards accounts, in which they pay significant interest in return for the customer doing a certain number and type of transactions each month.