Have you heard the adage, “There ain’t no such thing as a free lunch?” The “free lunch” in the saying refers to the nineteenth-century practice in American bars of offering a “free lunch” in order to entice drinking customers. Those customers ended up paying a lot for the “free lunch”. The basic idea of the adage is that you don’t get something for nothing.

There is no free lunch in banking services. If a bank is offering services for “free”, ask them to explain how they profit off your banking relationship. If you get a blank stare or the bank says that they just love to give stuff away, then you may want to find a bank that will be honest with you. A bank that is being transparent with their fees and has minimum balance requirements may actually cost you less money than the bank advertising “FREE”.

How does a “free” account end up costing you? According to the Consumer Financial Protection Bureau, overdraft fees accounted for approximately 65% of revenues from consumer deposit accounts for banks over $1 billion in assets. Among the same sample of accounts, accountholders that incurred one or moreoverdraft fees paid an average of $225 in fees per year. Couple the overdraft fee with other ATM, maintenance, and account use fees (for wires, etc.) and everyone is paying for these “free” accounts.

Comparing accounts at different banks is difficult, because a checking account can house a bundle of services and the fee disclosures vary and can run up to 40 pages. The account that offers the monthly maintenance fee and a minimum balance could be the one that saves you a bundle. Without a lot of painful analysis and a lot of assumptions, how can you determine which bank account is right for you?

The key to picking the right bank is to determine first who offers the services you need, to fit you, your business and your lifestyle. Then seek to understand what the bank wants from you. If you receive a notice that your bank is increasing their account service fees, talk with them to ascertain if the fee will actually impact you, or maybe there is another account option . If they are willing to talk and work with you, then you probably have a relationship focused bank and the right financial partner.




About the Author: Clinton Gerst is the President of Bank of Bozeman, and Independent Community Bank in Bozeman, Montana.

This article is provided for educational and informational purposes only. All expressions of option reflect the judgment of the author, as of the date of writing and are subject to change.