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For years and years, free checking accounts were the rule.  Any bank that charged a monthly fee was the exception.

Now, it seems the tides are turning.  Lately, many banks have been rolling out changes to where free checking gets eliminated without meeting certain conditions, usually by keeping a combination of an average daily balance or having a certain amount of money direct deposited every month.

People who don't meet these requirements (and even some that do) are understandably upset.  After all, it sucks to have to pay for something that you didn't used to have to pay for just a month ago.

But, does it actually maybe make sense?

One example I saw is that a bank will offer free checking if you have an average daily balance of $1,500.  This seems like a lot of money, and it is, but put it in perspective:

Would the bank rather handle one customer that has $1,500 balance or fifteen customers that each have a $100 balance.

In either case, the customers require resources from the bank.  They have computer entries.  They require statements to be sent out in some fashion.  Though much of the work done to manage accounts is automated, there are still computer resources that add up when you consider the hundreds of thousands of accounts that some banks manage.

At a certain point, the costs to the bank for a small balance customer may not make sense.  In fact, my guess is that the bank actually counts on a certain percentage of those smaller balance customers to close their accounts after they institute the changes.  From the banks perspective they come out ahead.

Let's go back, then, to why would a bank have offered them at all?

I think back in the beginning it was to build loyalty.  The hope was that a free checking account could be, in essence, a loss-leader.  They could then use that money losing checking account to offer credit cards or other services that could lead to money making opportunities.  They could build loyalty so that when the customer started making more money, they could offer investment services, mortgages, etc.

That actually makes sense, too.

But, let's face it, the days of loyalty when it comes to banking are over.  People leave banks for better rates or lower fees.  The web allows people to shop around for the best mortgage rates, the credit card with the lowest interest rate or the better rewards program.  In other words, the business model behind luring a customer in with a free checking account to make money down the line…is probably gone.

And so, then, appears to be the free checking account.

Have you been affected at all by free checking account changes?  Would you be able to meet the requirements if your bank instituted such a change?