The days of free checking accounts in America are waning.
New laws that reduce overdraft fees and the rates that banks charge merchants are cutting deep into bank revenues, prompting many to add charges or extra conditions on their checking accounts.
The portion of checking accounts offered by banks for "free" with no monthly service charge or minimum balance, fell from 76 percent last year to 65 percent this year, according to a national study of big banks by website Bankrate.com.
That means customers will have to shop more carefully -- and figure out what their financial needs and habits really are -- to get checking-related services for free or at low cost, consumer advocates say.
Some options: Sign up for direct deposit; do more banking online; use your debit card more; link with other accounts; and maybe, switch to smaller banks or credit unions where free checking is more common, they advise.
"The real important thing is that you don't get distracted by reward programs," said Tower Group consultant Brian Riley, citing a recent study that showed that rewards for a Hawaii trip could take years and $20,000 in debit transactions to accrue. "You really need to be focused on the services you want."
Some banks that charge for basic checking accounts will waive the fee when account holders meet specific conditions.
Your banking habits determine which account and waiver fits best. An Internet-savvy student with no paycheck might opt for the e-banking account. But someone on a salary might do better with waivers for direct deposit. Ask your bank for help, so they can keep your business, experts say.
"Free checking became a virtual commodity. That's going to change," said Bankrate.com senior financial analyst Greg McBride. "But it will still be available to consumers who are intent on having a free checking account."
So, how should consumers proceed to limit or waive fees?
While just 65 percent of checking accounts at big banks are offered free, another 23 percent become free by meeting such conditions as direct deposit, Bankrate.com's study found.
Direct deposit is an easy solution for those on a payroll. If you route those payments directly into your account electronically, you pay no fees at many banks.
Another option is to bank more online. You might consider an online-only bank; devoid of the costs of bricks and mortar, they tend to offer more free checking accounts. INGDirect.com offers an account that pays interest and will even mail your paper checks for you, according to its website.
You also might do more business with a traditional bank over the Internet, which saves the bank money on tellers in branches. That explains why HSBC offers an e-banking account.
Another option is to switch to community banks and credit unions. They tend to offer more free checking options, often because they expect less profit than bigger banks, said Bankrate.com's McBride.
"Large regional and national banks were the last to jump on the free checking bandwagon, and now, they're the first to jump off," McBride said.
Credit unions are generally cooperatives beholden to members, "so you're not trying to make money for personal investors or outside stockholders," said Meredith Gibson, senior vice president of marketing of Melbourne, Fla.-based Space Coast Credit Union, which offers free, no-interest checking.
Yet even credit unions are reviewing their pricing in light of regulatory changes that increase the costs of compliance and also cut revenues, experts say.
Central to the changes is a consumer-protection law that slashes the overdraft fees that brought in more than $37 billion to banks last year. And financial reform trims the "interchange fees" that merchants pay for things like debit-card purchases. That leaves less cash to subsidize costs to open and maintain free checking, financial specialists say.
Banks in other countries charge for debit cards, or they vary charges based on how many services you use, favoring larger users. Those are models U.S. banks may consider, said Tower Group's senior researcher Riley.
"You can expect more cafeteria services," based on your choices, "and you'll pay more," said Riley.