Free Checking Or Fee For All?

While the average American is making less and the income gap widens, so-called free checking accounts are becoming rarer, as the banking industry seeks ways to make up for revenue lost due to the sluggish economy and new regulations.

A new survey from data provider Bankrate Inc., which analyzed 477 checking accounts at 247 banks and thrifts, showed that almost every checking fee it follows increased, with some bank fees rising 25 percent or more in the past 12 months.

Only 39 percent of banks offered a checking account with no minimum balance requirement and no monthly fee -- the standard definition of a "free" checking account. That's down from 45 percent in 2011 and down substantially from its peak of 76 percent in 2009, according to Bankrate.

To avoid a monthly fee, bank customers in the U.S. must keep an average minimum balance of $723 in checking accounts that pay no interest, up 23 percent from the previous record set last year. The average monthly fee on noninterest checking accounts rose 25 percent to $5.48, also a record.

For interest-bearing checking accounts, bank customers have to keep an average balance of $6,117 to avoid paying a monthly fee, which rose 4 percent, to an average of $14.75.

A public outcry last year over the prospect of new monthly fees for bank debit cards forced big banks, including Bank of America Corp. (NYSE: BAC), Wells Fargo & Company (NYSE: WFC), JPMorgan Chase & Co. (NYSE: JPM) and SunTrust Banks, Inc. (NYSE: STI), to drop the fees.

Now, the industry is trying to make the most out of existing fees.

Banks are raising fees across the board, from ATM surcharges to overdrafts, as recent federal restrictions may cut annual revenue by more than $10 billion. Revenue at federally insured banks and thrifts fell 1.9 percent in 2011 to $652.71 billion, according to data from the Federal Deposit Insurance Corp.

“Checking accounts that are free on a stand-alone basis continue to diminish, said Greg McBride, Bankrate.com's senior financial analyst.

The cost of getting cash from an out-of-network ATM continues to rise. Not only will bank customers pay a fee to the owner of the ATM -- a record $2.50, up 4 percent from last year -- they’ll likely pay their own bank an average out-of-network fee of $1.57, which jumped 11 percent from last year.

For a customer encountering both fees, the average total of $4.07 is a new record and is up nearly 7 percent from last year -- a stiff price to pay for a little extra convenience.

The average overdraft fee, known in the banking industry as a nonsufficient funds fee, rose to a record high of $31.26, up from $30.83 last year. The year-over-year increase is about in line with inflation, which is at 1.4 percent.

At a time when the economy is soft and income is limited, some customers are ready to push back.

New 2011 census data released Thursday showed the number of Americans living in poverty grew to 15.9 percent in 2011. It was 15.3 percent in 2010. That means 48.5 million Americans had an income below the poverty level.

In a recent Bankrate poll, 72 percent of Americans said they would consider switching banks if their financial institution raised its fees on checking accounts, up from 64 percent in March 2011.