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Complicated Future For ‘Free’ Checking

American Banker
It never hurts to have a backup plan.

Federal lawmakers and regulators are threatening severe limits on how much banks may charge in overdraft fees, which heavily subsidize free checking.

Bankers have already started developing makeover plans for the highly popular product in case overdraft revenues are reduced. Among the options are imposing new limits on free checking that reduce costs or raise revenue or charging monthly fees on accounts that include more bells and whistles.

The marketing challenges promise to be dicey.

Diagram: By the Numbers Overdraft Fees heavily subsidize free checking accounts officials say. Data from 2008. Combined overdraft fee revenue $30 billion, Portion of Deposit Service charges that represent: 74%, Median Fee: $27, Median fee for banks with more that 1B in assets: $30. From an FDIC study of 452 banks. Sources FDIC, Oliver Wyman Group

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