Banks are scrambling to find ways to make up for an estimated $50 billion in revenue lost from changes in credit card regulations and limits on overdraft fees, and much of their attention is focusing on checking accounts.
The bulk of the Credit Card Act of 2009 restricting interest rate hikes and fees on credit cards goes into effect February 22, and starting July 1, the Federal Reserve will enforce new rules that require banks to get your permission to charge you overdraft fees when you overdraw your account.
As a result, banks are changing how they market and manage checking accounts. Here are five trends you can expect for 2010:
1. Fewer Free Checking Accounts
With revenue dropping, some as a result of new restrictions, many industry analysts are expecting banks are planning to dropconsider dropping free checking or to raiseraising the threshold for free checking. Some rewards checking accounts will require higher minimum balances, for instance. That said, some community banks in particular may stick with free checking as a way to differentiate themselves., according to the Wall Street Journal.
2. More Cash Offers to Open Checking Accounts
Banks want your business. In the current credit market, banks are making fewer loans and making less revenue on interest, so their reliance is growing on revenue from checking accounts. Gone are the days of the free toaster. Now banks are offering cash to get your business. Some banks are offering $100, $150, or even $200 just to open a checking account. These offers are designed to be tempting, but consumer advocates advise you look before you leap. Make sure the checking account is a good deal in the long run.
3. Heavy Overdraft Program Promotion
The Federal Reserve estimates banks made $25 billion to $38 billion a year in overdraft fees. Banks profited by letting consumers overdraw their accounts and levying a fee each time, a practice that drew the ire of lawmakers and consumer advocates last year. In some cases, customers were charged hefty fees when overdrawn by less than a dollar. Starting in July, banks will have to get your permission for overdraft programs, which will allow you to overdraw your account (only up to a certain level) and pay a fee for the privilege.
4. New Types of Checking Accounts
Banks will experiment with different types of checking accounts to appeal to greater numbers of customers. The New York Times’ Bucks blog reported that banks are offering new checking products in place of free checking, often bundling together services such as credit monitoring or safe deposit box rental. Many banks already are promoting customized accounts, which let customers choose from a menu of features. Some menu options are free, but others come with a fee. Or they're offering a variety of plans with varying costs and features. You'll have to weigh the plans to see if an interest checking account is worth the fees, for instance, or if you're better off with a low-cost account that pays no interest.
5. New Fees and Higher Fees
Don't be surprised if you have to pay more to put a stop payment on a check or for a savings deposit box. Banks may hike fees or start charging fees for currently free services, such as getting paper statements, to help offset lost revenue elsewhere.