Free checking programs are in a state of decline, with community banks and credit unions being some of the only financial institutions that now offer them. And now, overdraft protection programs are being threatened as well by recent legislation.
Many agencies fail to see the link between free checking and overdraft protection, and as a result, legislation that impacts one has a direct impact on the other as well. Market research reveals that consumers would rather open a free checking account that offers a combination of overdraft protection and zero monthly maintenance or minimum balances versus an account with no protection and higher fees, according to a Georgetown University study.
However, the Dodd-Frank Act, as well as the recently added Durbin Amendment, have raised costs for banks, and make it more difficult for them to offer services such as free checking and reward programs. A 2011 Bankrate.com study reveals that only 45 percent of noninterest accounts offered free checking. This is in comparison to 76 percent of free checking accounts in place two years before, prior to the several agencies implementing new banking rules.
As regulations begin to tighten around overdraft programs, some analysts agree that free checking accounts that provide lucrative debit card reward programs to consumers may also be threatened.