Free Checking Accounts More Available in Small Banks
In June, 2011, the Federal Reserve limited the fees banks could charge retailers for debit card purchases to $0.24 per transaction. This was a significant decrease from the previous average of $0.43 per swipe. Many analysts thought banks would make consumers pay for this loss of revenue by eliminating free checking accounts. But a new study shows that is not the case.
Small banks with assets under $10 billion were exempt from these limits on swipe fees. Those smaller financial institutions can essentially charge whatever they want as an interchange fee. Since there are more smaller banks than larger ones, free checking has actually become more accessible to the general public.
Richard Sullivan of the Federal Reserve Bank of Kansas City estimates a loss of $8 billion a year in swipe fees because of the limit. Despite that loss, free checking in small banks rose from 37% to 44% from 2011 to 2012. Free checking in large banks was cut almost in half to 27%.
Sullivan’s research indicates that small banks have reduced the number of requirements they have for free checking, while large banks have increased these requirements. This makes consumers even more inclined to go to small banks to set up checking accounts.