There Is No Such Thing as Free Checking


Over the last four years, communities across the country have witnessed great upheaval at the hand of bank policies that have led millions to lose their homes and businesses. As banks have failed, merged, and restructured, they have started to test and institute new fees on a variety of their products. The most recent product on the chopping block is basic checking. Big banks have started to increase and add fees to their so-called “free checking” products—in some cases, even charging a fee if you want to talk to a bank teller.

Concerned about this trend, the California Reinvestment Coalition (CRC) wanted to find out how much “free checking” costs California’s underserved consumers. We decided to shine a bright light on the big banks’ checking account products and score them in a report card. The report “Making the Grade: Are California’s Biggest Banks Failing Consumers” grades the six largest banks in California on a variety of “subjects” that particularly affect low and moderate income (LMI) customers. These six banks—Bank of America, JP Morgan Chase, Citibank, Union Bank, US Bank, and Wells Fargo Bank—represent a staggering 69.3% of the deposits in California. With their dominating presence in California, CRC wanted to know if banks were offering products that allowed people to stay in the financial mainstream, and stray away from predatory institutions like payday lenders, check cashers, etc. The news was disheartening.

Taking each bank’s grade on the six “subjects” together, US Bank and Bank of America received the highest grades (C-) and Wells Fargo received the lowest grade (D-), while the other three banks received a meager D+. The banks were given individual grades for the six subject areas as well—Branch Placement in LMI Communities, Basic Checking, Overdraft Protection, Electronic Benefit Transfer (EBT) Fee Waiver, Transaction Clearing, and Payday Advance Products. Each bank failed in at least two subjects.  

Perhaps most concerning was the Comparative Analysis of Monthly Fee Impact (or, “CAMFI”, a new tool developed by CRC), which found that LMI consumers can lose up to 48% of their monthly balance to checking account fees if they bank with Bank of America, Chase, Citibank, US Bank, or Wells Fargo. Using this tool, CRC was able to calculate the impact of fees (i.e. non-bank ATM fees, overdrawn point of sale transaction fee, nonsufficient funds fee, and monthly balance fee) on the same hypothetical customer at all six banks. Although the level and structure of each bank’s fees differed, overall, these fees are draining the accounts of their LMI customers who often do not meet the criterion for “free”. (For example, Union Bank and US Bank were the only banks that did not charge a monthly maintenance fee for basic checking accountholders who did not meet a balance threshold.)

Every bank except for US Bank charged customers for using state-issued debit cards loaded with their public assistance benefits (EBT)—at once, draining both the customer’s benefits and taking public funds. Two of the banks—US Bank and Wells Fargo—offered predatory payday loan products that charged annualized interest rates that compare to those offered by predatory payday outlets. Overdraft protection plans—designed with multiple layers of triggers and fees—are rarely defined or understood by any customer, and could cost customers upwards of $100 a day. Branch presence in LMI communities was another major concern as Chase, Union, and US Banks all received a “C” in this category. Even more concerning is the information presented in a recent New York Times article that described how these banks are closing their branches in low income communities at a higher rate than in high-income communities (“Bank Branch Closings Tilt Toward Poor Areas”, February 22, 2011, New York Times).

Banks are gobbling up consumer’s account balances with exorbitant fees that are pushing people out of the financial mainstream and towards predatory lenders. While bank profits are rising and billions of dollars in compensation packages have been doled out to executives, these same banks are testing new fees for basic checking accounts. Banks can and should structure their fees in a way that keeps consumers banked and allows California’s most vulnerable populations to maintain and grow their assets safely.  Banks should value all of their customers and offer innovative products that can reach communities struggling during these tough economic times.

For a detailed description of each bank’s grade on the subject areas, please refer to the full report at


The California Reinvestment Coalition advocates for the right of low-income communities and communities of color to have fair and equal access to banking and other financial services. CRC has a membership of more than 280 nonprofit organizations and public agencies across the State.


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