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Where to find 'free' checking with no strings attached

Tired of paying your bank for checking or maintaining a sizeable balance in order to have the monthly fee waived? You might want to check out what’s available from a credit union.

Seventy-two percent of America’s 50 largest credit unions offer standalone free checking – with no strings attached – according to the 2013 Credit Union Checking Survey by Bankrate.com released Monday. Only 39 percent of the nation’s banks offer such standalone free checking, the website reported last September.

"While free checking has been in sharp decline at banks in recent years, it remains the rule rather than the exception at credit unions,” noted Greg McBride, Bankrate’s senior financial analyst. 

The website’s surveys show that since 2010, the availability of standalone free checking dropped from 78 to 72 percent at credit unions and plunged from 65 to 39 percent at banks.

Bankrate found that nearly all (96 percent) of the largest credit unions offer a checking account that can become free with direct deposit, e-statements, transaction activity, other accounts or some combination of these factors.

Both banks and credit unions are grappling with ways to boost revenue and pay for additional costs created by recent regulatory changes. Because credit unions are not-for-profit cooperatives, McBride explained, there are other things they can do before they eliminate free checking.

Other significant finding
Most banks charge their own customers for using a non-network ATM. While the average fee for credit unions is $1.01 (up from $0.97 last year) the average for banks is $1.57. Bankrate found that 30 percent of credit unions either do not charge a fee to use another bank’s ATM or they provide at least one free withdrawal at an out-of-network ATM per week. 

Bankrate also found:

  • Half of the 50 credit unions surveyed have checking accounts with no minimum opening deposit requirement. None requires more than $100 to open.
  • Nearly three-quarters (74 percent) have no minimum balance requirement. Another 8 percent waive the monthly fee with a minimum balance of no more than $750.
  • Monthly service fees on credit union checking accounts range from $1 to $10, with $2 and $5 the most common.
  • Non-sufficient funds (NSF) fees at credit unions average $26.74. The banks NSF fees average $31.26.
  • The most common NSF fee at credit unions is $30, compared with $35 at banks.

The bottom line
Compare the largest banks with the largest credit unions, and you’ll find that credit unions have lower fees and smaller minimum balance requirements. They’re also much more likely to offer a free checking account that does not require a minimum balance

“Banks are becoming more selective in the types of customers they want,” said Pam Banks, senior policy counsel for financial services at Consumers Union (the advocacy arm of Consumer Reports).  “They are looking for people with multiple needs: mortgage, credit card and auto loan. If you are willing to make that bank your single provider for all of these services, then they are more willing to offer you free checking.”

Consumers Union advises people who are not happy with their bank to do their homework and find another financial institution that will provide the services they want at a reasonable price.

“We have found that credit unions and community banks tend to offer better fees, better products and better services,” Banks told me.

Switching financial institutions is a hassle, but it can be done if you have a plan. To get started, find the banks (FindABetterBank.com) and credit unions (MyCreditUnion.gov) in your area. Consumer Reports has prepared a tip sheet on how to move your money safely and effectively.

Herb Weisbaum is The ConsumerMan. Follow him on Facebook and Twitter or visit The ConsumerMan website.