Bank of America Offers Free Checking With A Catch
Bank of America announced its second quarter earnings tomorrow. Analysts expect the bank to report a profit of more than $2 billion, though the weak economy continues to drag on mortgage lending and other services. Today Bank of America announced a new product that seems unlikely to boost revenues, because it's completely free. If you don't mind doing all of your banking online or at an ATM, Bank of America says you can have a free checking account. And you won't even have to keep the $1,500 minimum balance that normally qualifies you for free checking. "We're trying to listen to our customers," says BofA spokeswoman Anne Pace. "This new offering is designed for those customers who prefer to bank how they want and when they want." And without fees, of course. This new "eBanking" option comes at an interesting time for the industry. Banks are facing financial reform that will limit many of the fees they have been charging. Bank of America already eliminated the unpopular overdraft fees it was charging on debit card purchases and bank executives have said they're looking for other ways to make up that revenue. Offering another free product seems counterintuitive, but Virginia-based banking analyst Bert Ely says BofA will save labor costs by sending customers to the web and ATM. "And we're going to see a lot more of this," says Ely. "Also efforts to try and switch people away from receiving bank statements in the mail to getting them online because that will save printing and postage expense for the banks." Plus, the bank has a free product to offer customers if it decides to boost other fees. A Boston-based research firm called Celent says more than half of checking accounts are currently unprofitable for banks and new regulations will cut that revenue even further. Wells Fargo recently announced it will no longer offer free checking to new customers. Ely expects to see more experimental products as the big banks dig for ways to make money under tighter regulation.