‘Free Checking’ Fee

Tuesday, January 02, 2007

In February, Bank of America will begin charging customers with “Free Checking” accounts $5.95 a month. The bank is switching its free checking customers to “MyAccess” checking accounts, which levy a $5.95 fee unless account holders make direct deposits or online bill payments.

For small depositors, the new fee threatens to turn their bank accounts into the financial equivalent of a Roach Motel—where your money checks in but doesn’t check out.

B of A must be banking on sheer inertia to retain its customers, since most of its rates are not very competitive with other financial institutions. Its “Interest Checking” account, for example, offers a pitiful 0.05% APY, which means that if you give the bank $1,000 of your money to lend out, by the end of one year you will have earned…50 cents. This barely keeps pace with stuffing your money in a mattress. Check it out for yourself.

If you’ve had it with rogue fees and account switcharoos taking you by surprise, consider putting your money in a credit union. This site identifies credit unions in your area.

For those determined to stick with Bank of America, Paypal transfers appear to qualify as direct deposits, so if you prefer not to make a direct deposit but have a Paypal account, transferring $1 a month can keep you fee-free.

Another way to avoid the fee is to use the bank’s online bill-paying system. If you don’t have any bills to pay, you can make payments to yourself once every three months. It qualifies as an “online bill payment” if you list yourself as the payee, indicate that the “payee” doesn’t accept electronic payments, and have a check for a few bucks sent to your address once per quarter.

If you want to switch banks, resources for the best current bank account offers available include Bankrate, Fatwallet, and bank deal blogs like this one.

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