Free checking may be a reform victim

WASHINGTON, Aug. 9 (UPI) -- That free checking account at national banks in the United States may disappear, compliments of the financial reform bill, a banking industry analyst said.

"Free checking has been underwritten by overdraft and interchange fee revenue, and both are being squeezed by regulatory and legislative change," Bankrate.com analyst Greg McBride said, The Detroit News reported Monday.

Wells Fargo & Co. canceled a free checking policy for new customers July 1, the same day the government's mandate that banks get permission to charge certain overdraft fees went into effect.

Going forward, checking accounts at Wells Fargo will now cost $5 per month unless a consumer meets certain goals, such as maintaining a $1,500 average balance on their account.

Customers now must sign up for an overdraft program, which would allow credit card purchases to go through on accounts that are overdrawn for a fee of generally $20 to $35 per overdraft.

The increasingly lucrative overdraft side of the banking business has recently become an $18 billion to $23 billion-a-year business for banks, said Novantas LLC, a consulting firm in New York.

Bank of American spokesman T.J. Crawford said, "Each (banking option) has value and there's a cost that comes with that value."

"Customers ill have choices on how they pay for that value. Some will choose to pay for it through their behaviors," he said.