Free banking services are not going away; they are just getting harder to find.
On Sept. 30, Bank of America announced it would begin charging most customers $5 a month for debit card usage next year, a move other big banks are testing.
Rival Citibank boasted that it would not charge for debit cards, but has begun notifying customers of changes to its checking accounts starting Dec. 9. In most cases customers who don't meet new, mostly stiffer, requirements will pay higher monthly fees.
A survey in August by Bankrate.com found that only 45 percent of large banks and thrifts offered a free checking account, down from 65 percent in 2010 and 76 percent two years ago.
However, 92 percent in the latest survey offered a checking account that was either free or free if customers met certain requirements.
Fewer banks are offering free checking with no strings attached because of two new regulations, says Claes Bell of Bankrate.com. One that took effect last year prohibits banks from enrolling customers in debit card overdraft protection plans unless they opt in.
An amendment in the Dodd-Frank Act, which took effect Saturday, cuts the fees large banks can charge retailers on debit card transactions to about 24 cents from an average of 44 cents.
Banks had been using debit card overdraft and transaction fees to subsidize free checking accounts. With those revenues diminished, many large banks are raising other fees.
"The good news is, there are lots of ways to get around them," says Bell.
He says consumers should read carefully any communication they get from their bank, because banks must notify customers of fee changes in advance. They should also check monthly statements to see if any new charges crop up. They can call or go to their bank to ask what they can do to avoid fees.
BofA's new debit card fee, for example, will not apply to certain accounts including one that requires $10,000 in combined deposit balances, $15,000 in loan balances or $15,000 in brokerage assets. It won't apply to Campus Edge accounts or to prepaid debit cards that carry government benefits.
Citibank is raising some requirements for free checking but simplifying others in December.
On its EZ Checking, customers will be charged $15 a month unless their average balance in deposit accounts (such as checking, savings and certificates of deposit) equals or exceeds $6,000. Today, they are charged $10 a month unless they either have $1,500 in combined deposit balances or have at least one direct deposit and one online bill payment per month. Citi stopped opening EZ checking accounts after October 2010.
Citi is also raising the minimum balance requirement to avoid fees on its higher-end Citibank Account.
On its Basic Checking account, to avoid a $10 monthly fee, customers will have to make one direct deposit and one online bill payment a month or maintain $1,500 in their basic checking and basic savings account combined.
Today, to avoid an $8 monthly fee on this account, customers must perform a total of five or more transactions in certain categories including direct deposit, debit card purchases, online bill payments, checks paid or ATM withdrawals.
Consumers may find it easier to get free checking with fewer strings at smaller banks, credit unions and online banks.
"If you look for small banks and credit unions, the chances are good there will not be any mandatory fees," says Joe Ridout, a spokesman for Consumer Action. He said they are exempt from the amendment that cuts the fees that banks can charge retailers.
Small banks, credit unions and online banks can charge less because they have lower overhead than the big banks. Also, credit unions are not-for-profit enterprises.
The downside is that small banks and credit unions don't have the vast branch network or full array of services that large banks do. However, many do belong to large ATM networks that don't charge members fees or will reimburse their customers for fees charged when they use another institution's ATM.
Ridout says it will be interesting to see whether bank customers simply absorb the new fees or make like Netflix customers, who abandoned the movie-rental company in droves when it announced higher prices.
The banks "are making a gamble that inertia will win out," Ridout says. "We hope consumers send the clearest message possible that they will not stand for these fees. The only way to ensure banks will hear that message is to take money out of banks that charge too many fees."