Beaufort News

Wells Fargo to end free checking

CHARLOTTE, N.C. -- Wells Fargo & Co. customers in North and South Carolina and other states who still have free checking accounts are being notified that they soon will face a $7 fee.

The change comes as the San Francisco bank finishes its yearlong process of switching customers who opened free checking accounts with Wachovia to a new fee-eligible account. The fee for North and South Carolina customers will be effective Aug. 7 and show up in statements in September.

Florida, Virginia, Maryland and Washington, D.C., also are affected by the final wave.

The fee goes down to $5 if customers forego paper statements. Customers can avoid the fee by maintaining a balance of $1,500 or having monthly direct deposits of more than $500.

Wells dropped free checking for new customers in 2010, but many customers still had free accounts as a holdover from the Wachovia era. Wells Fargo bought Wachovia in 2008.

The bank has been gradually moving existing customers in various states away from free checking accounts over the past year. It transferred customers in 23 states into the new accounts in 2011 and announced six more states in March.

The bank has said it expects 80 percent of its customers would avoid the fee.

Banks have moved away from free checking accounts as low interest rates have made them less profitable. At the same time, new financial regulations curbed revenue streams that underwrote free checking, such as rules on overdraft fees and the cap on swipe fees that merchants pay on debit card transactions.

As of last fall, about 45 percent of U.S. noninterest checking accounts were free, down from a peak of 76 percent in 2009, according to a survey from research firm Bankrate.com.

Although many community banks and credit unions still have free checking, it has all but disappeared at larger banks. Bank of America no longer has a free checking account option, and BB&T offers one only to students.

In a December investor presentation, Wells Fargo CEO John Stumpf said it costs about $200 to $300 a customer to provide a checking account, including the costs for fraud protection and customer support.

"As an industry, we have communicated with a generation of customers that this is all free," Stumpf said. "There are costs."

Despite being increasingly fee-sensitive, the public has been generally accepting of checking-account fees because they are fairly easy to avoid, through minimum balances or direct deposit, said Greg McBride, senior financial analyst at Bankrate.com. That's in contrast to the debit-card fees that Wells, Bank of America and other banks tried last year, then quickly withdrew amid a storm of protest. In general, those fees were harder to avoid.

"Just because banks are phasing out free checking and instituting fees, it doesn't mean that every customer's paying the fee," McBride said. "The bottom line is, you're not hostage to these fees. There are ways to get around it, either at your current bank or by shopping around."

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