Free Checking Becoming Endangered Species

Once upon a time, banks attracted customers with the promise of a free checking account. In return, the bank snagged a customer for the long-term, who might also need to borrow money to purchase a home or vehicle, or need other financial services the bank provided.

These days, banks are on the prowl for fees and a checking account provides a target-rich environment. As a result, only 45 percent of non-interest checking accounts are free, down from 65 percent in 2010 and the peak of 76 percent just two years ago, according to Bankrate.com's 2011 Checking Study.

"The decline of free checking is in full swing, however, savvy consumers can take advantage of an increasing amount of fee waivers, most commonly with direct deposit," said Bankrate's senior financial analyst, Greg McBride. "Ninety-two percent of non-interest accounts are either free or can become free."

Balance requirements growing

Consumers are finding that when it comes to fees, both interest and non-interest checking accounts are seeing big increases. Some banks offer free checking but require a minimum balance throughout the cycle to maintain them. The study shows the balance required to keep a free checking account truly free is going up.

On interest-bearing checking accounts, the balance required to avoid the fee jumped 43.9 percent to $5,587 from $3,883, though these balances are increasingly permitted to be held in other accounts and not strictly in the checking account.

On non-interest accounts, the sharp decline in free accounts means 60 percent more accounts now carry fees and balance requirements. The average monthly fee is $4.37, up from $2.49 last year, and the balance required to avoid it is $585, more than double the $249 from one year ago.