Free checking accounts might be going away—here's what it means for your wallet

The era of free checking accounts may be coming to an end as major banks grapple with new regulations and shrinking revenue streams.

Marianne Lake, the head of Chase Bank, dropped a bombshell last week, telling the Wall Street Journal that Chase might stop offering free checking and banking services to their 86 million customers.

"The changes will be broad, sweeping and significant," Lake warned. "The people who will be most impacted are the ones who can least afford to be, and access to credit will be harder to get."

The catalyst for this potential shift is a recent move by the Consumer Financial Protection Bureau. In March, the agency passed new caps on credit card late payment fees ($8) and overdraft fees ($3). However, a coalition of banking groups has appealed these regulations.

Jaret Seiberg, financial services analyst at TD Securities, explained that consumer banking has long relied on providing free basic services to attract customers while recouping costs through various fees and higher interest rates.

The new regulations threaten this model.

Other banks may follow suit

Even if you’re not a Chase customer, you may need to pony up for your chequing account soon. Lake expects other banks to follow suit if the new regulations are implemented.

"Big banks can make up for a dent in consumer banking revenues with profit from their wealth management and investment banking arms. Smaller and regional banks will struggle to make up for that,” said Dan Goerlich, a consulting partner at PricewaterhouseCoopers.

For the average American, the end of free checking would mean new monthly fees. We don’t know exactly how much, but the average fee for non-interest-bearing checking accounts in 2023 was $5.31, according to Bankrate.com. This translates to over $63 per year.

Banks argue caps on their fees mean they’d have to pass on costs to customers, but not everyone buys that argument.

“Yet again, banks are dressing up their attempts to maximize their own profit under the guise of what's good or bad for customers,” said Dennis Kelleher, president of Better Markets, an economics think tank that favors the proposed regulations.

'Til death or ‘til dollar? Will people really ditch their accounts?

If a significant number of customers were to leave banks over these new fees, it could have serious implications for the banking sector. But would people really leave their long-held checking accounts behind?

"People tend to stick with their bank accounts—sometimes more than they stick with marriages," said Adam Rust, director of financial services at the Consumer Federation of America.

Bankrate found that the average US consumer has had the same checking account for nearly 18 years—that's 10 years longer than the median duration of first marriages that end in divorce.

This loyalty, combined with the hassle of switching automated bill payments, might deter many from changing banks, even in the face of new fees. Rust also suggests that a modest fee for an account might be better than surprise hidden charges later.