Why would you pay for a checking account?
October 06, 2011
With free checking still available from some banks, you might answer the question in the title of this article by saying that you would not pay for a checking account, period. However, there is another way to look at the question: Are there add-on services that would make a checking account worth paying for?
The squeeze on banks
Regulatory changes have inhibited the ability of banks to collect overdraft charges and interchange fees on debit cards. As a result, the FDIC reports that service charges on deposits were down 17 percent in the first quarter of 2011. With other aspects of their businesses, such as lending, also struggling, banks are desperate to replace lost revenue. To many banks, charging for checking accounts seems a natural solution.
In doing this, banks face a dilemma. When banks start charging for checking accounts, many customers tend to find other alternatives. After all, free checking is still widely available. The latest MoneyRates Index fee survey showed over a third of checking accounts are still free, and the Bank Administration Institute reports that 25 percent say that they plan to continue to offer free checking under all circumstances.
Reasons to pay for a checking account?
While banks might have trouble charging for services they've long offered for free, they might make it worthwhile for a customer to pay for a checking account if other services were bundled in. Some examples might include:
- Credit monitoring.
- Budgeting or tax preparation tools.
- Identity theft protection.
- Participation in local merchant discount networks.
While these are all items that are available to customers in one form or another outside of a checking account relationship, they are examples of services the bank could use its bulk buying power to obtain at a lower cost than would be available to the average consumer. Thus, bundling these services with a for-fee checking account could be a win-win for a bank and its customers.
So what about it--would any of these additional services induce you to pay for a checking account? If not, can you think of services which would make a checking account fee worth it to you?
