KeyBank, one of largest regional banks in the Northeast, introduced a free checking account that is sure to attract the masses, but it lacks some of the features that consumers are accustomed to with a traditional checking account. With the scarcity of free checking options available from the nation’s big banks, KeyBank sets an example for how megabanks can reintroduce free checking to American consumers.
The bank’s new Hassle-Free Account comes with no paper checks — customers must use KeyBank’s online bill payment system. Additionally, overdrafts are prohibited on the account.
“Managing money is not a ‘one-size-fits-all’ proposition,” said Dennis A. Devine, co-president of Key Community Bank and head of the bank’s consumer and small business division, in a press release. “We designed the KeyBank Hassle-Free Account for banking customers who want easy access to their money without the worry of unexpected fees.”
KeyBank typically charges $34 for each of the first two overdrafts during a 12-month rolling period, and $38.50 per overdraft thereafter.
The few disadvantages of the account (not being able to write checks or overdraw the account) could be a deal-breaker for potential customers, but they do get to enjoy a free checking account, which is rare among the nation’s largest banks. If you do not write checks, nor do you mind that your transactions are declined when there aren’t enough funds in your account, the Hassle-Free Account is great for you.
While you may wonder why overdrawing an account is a disadvantage, consider those who need to get bills paid, and happen to have insufficient funds. Even though they get hit with an overdraft fee from their bank, they still get their bills paid. With this account from KeyBank, the transaction simply does not go through if the customer doesn’t have sufficient funds, which could mean late fees and unpaid bills.
Currently, free checking accounts do not exist at the top 10 U.S. banks. (Capital One’s online banking division offers a free online checking account.) These big banks charge an average of $9.99 per month for a basic checking account (fee waivers are available).
KeyBank’s basic checking account, Key Express Checking, has a $7 monthly fee that can be waived when customers make at least $500 in total deposits or perform eight transactions per statement cycle. Check-writing and overdrafts are possible with this account.
Finding a way to offer free checking accounts
Ever since new financial regulations put a dent on debit card interchange fee income for banks, free checking accounts have become harder to find. The rule had limited the fees that big banks collect from merchants when consumers swipe their debit cards to make purchases.
Large banks responded by discontinuing their free checking accounts and replacing them with accounts that came with monthly fees unless customers met certain requirements.
KeyBank’s new Hassle-Free Account goes against that trend. In exchange, accountholders would forfeit some of the traditional features that they’re used to using in the past.
Fifth Third Bank unveiled a similar account, called the eAccess Account, that doesn’t come with check-writing or paper statements. It has no monthly fee, but still requires customers to post $500 in monthly direct deposits. (Three consecutive months in violation of these terms will result in an account conversion.)
These different types of checking accounts show that banks may be able to provide free checking accounts if they cut out some of the features that are costly for the banks to maintain. More banks should take similar approaches as KeyBank to restructure their checking accounts in an effort to repair their tarnished image in the eyes of American consumers. Those who had free checking, and then lost it, would be glad to rediscover that banks still offer some form of free checking.
As a friendly reminder: free checking accounts are easily found at online banks and brokerage firms. However, the downside is not having access to full-service banking from banks with large branch networks.