Is there a fee inside that “free” checking?

I just received a blog post from ING Direct and it was so good, I thought I should share it with you. http://wethesavers.ingdirect.com/

Once upon a time, way back in 2009, it was easy for big banks to make big money off of their checking account Customers—in the form of overdraft fees and other so-called “service charges.” For many of the nation’s biggest banks, these service charges accounted for anywhere from 11 percent to 28 percent of overall core revenue, according to the Wall Street Journal. But last year the Federal Deposit Insurance Corporation began flagging some of the industry’s more abusive practices, such as the huge overdraft penalties—as much as $35 a pop—that banks charged customers who dipped into debt for incidental purchases as minute as a cup of coffee.

That means banks are scrambling for new sources of revenue.

Tag, free checking: You’re it.

Before, because of the money they made on overdraft fees and other charges, banks were able to offer the basic service of a checking account for free. Now, many are sticking a price tag on that basic service.

However, consider this: According to a recent study, more than half of checking account customers are highly likely to switch banks if their institution begins charging fees for what were previously free services for their checking accounts. What does that signal? Any bank with a brain in its branch is going to offer a workaround, a way to keep the basic service “free”—in exchange for certain behavioral requirements.

Thus, “free” checking becomes an if/then scenario.

If you keep a minimum balance of $2,000…then we won’t charge you for your checking account.

-and/or-

If you have a monthly direct deposit of $500…then we won’t charge you for your checking account.

-and/or-

If you agree to never step foot in our branch or demand anything of our customer service… then we won’t charge you for your checking account.

The array of choices and combinations by which one can be assured of “free” checking is dizzying and potentially misleading. After all, maintaining a daily balance of $2,000 in a checking account means you’re forgoing interest you’d earn in a high-yield savings account—at current rates, that annual opportunity cost is roughly equivalent to a $20 fee.

The New York Times recently published an enlightening piece titled “As Banks Raise Fees, You Have Options.” Indeed, you do have options—and some are far better than others. So if your bank is cramping the “free” in your free checking, we’ll offer you a free piece of advice: Do your homework.

Go to http://wethesavers.ingdirect.com/road-to-saving/is-there-a-fee-inside-that-free-checking/. This is a great blog to follow.