PNC Financial Services (PNC), Bank of America Corp (BAC): 3 Reasons You Won’t Have to Kiss Free Checking Goodbye

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PNC Financial ServicesThe line from PNC Financial Services (NYSE:PNC)‘s Bill Demchak during the bank’s second-quarter earnings call was unambiguous: “We are phasing out traditional free checking.”

The “why” behind such a move isn’t complicated. Yesterday, my fellow Fool John Maxfield shared the following:

According to Moebs Services, a consulting firm that specializes in the banking industry, the average checking account costs the nation’s biggest banks between $350 and $450 per year. Meanwhile, the average revenue per account comes in at an estimated $268 per year.

That’s painful if you’re a bank losing money on those checking accounts. There are a few things they can do to turn that frown upside down, though, and clearly one of them is no longer offering money-losing accounts for free.

But reports on the death of free checking are premature. Consider if you fit into any of the following three categories:

1). You have an average monthly balance of $1,500 or more.
2). You have balances across multiple products from your bank (IRA, savings, money market, CDs, etc.).
3). You have a monthly direct deposit of $500.

The fact that you’re reading this article right now makes me pretty confident that one of the above — if not multiple — are true for you. To be sure, “truly” free checking is still available. Huntington Bancshares Incorporated (NASDAQ:HBAN), for instance, has an “Asterisk-Free Checking” that’s free of monthly fees and “most importantly, free from asterisks.” But customers can also bump up to Huntington’s “Plus Checking” by maintaining a balance of $15,000 across Huntington products (checking, savings, money market, and so on).

Turning back to PNC Financial Services (NYSE:PNC) and some of the other big boys, though, that $1,500 average monthly balance will still score you a PNC Financial Services (NYSE:PNC) “Performance” account with no monthly fee. Similarly, you can avoid monthly fees on Bank of America Corp (NYSE:BAC)‘s “MyAccess Checking” and Wells Fargo & Co (NYSE:WFC)‘s “Value Checking” with that average monthly balance. A monthly direct deposit of $500 will also nix the Wells Fargo & Co (NYSE:WFC) fee, while it only takes a $250 monthly direct deposit at Bank of America Corp (NYSE:BAC) to knock off the fee there. And Bank of America Corp (NYSE:BAC) also offers more advanced monthly fee-free checking for customers who have certain outstanding loans.

The point, from a consumer’s perspective at least, is that there are a variety of relatively painless ways to avoid checking-account fees even if you don’t want to switch to a local bank or credit union — which, of course, is also an option.

What investors want

If this all seems like a lot of hoops for customers to jump through to get their free checking, remember that it all loops back to the quote I grabbed from Maxfield above. There are a lot of checking accounts that just aren’t profitable for banks. This presents a challenge because:

1). Unprofitable customers aren’t good for a business (duh).
2). Attracting prospects that may be great long-term customers may require using a loss-leader product.
3). It’s not always obvious at day one which prospects will be those long-term pluses.

For the biggest banks, we could probably add another bullet point: There’s enough smoldering animosity that any attempt to charge additional fees is met with outcry.