TCF Financial, a small bank in Minnesota, has decided the free checking concept has run its course. While the idea of a free checking account provided an amazing array of marketing and other benefits for the bank, the regulatory climate has forced its hand, it says. Soon, it will introduce a monthly maintenance fee on more than 1 million accounts. Customers as of now are unsure how much the fee will be. 

Other banks across the country will likely follow suit. All this is the result of the new legislation that essentially makes overdraft coverage on ATM and debit card transactions an opt-in service. Many banks of course provided this service--though some consumer advocates would quibble with the description as a "service"--automatically. No one will argue that they emerged as a critical source of revenue for banks--to the tune of nearly $40 billion in 2009. It's unclear exactly how much of this will be lost, but most assume it will be substantial. Bank of America (BAC), for example, has said that because of changes it has made in advance of the new law, it has already given up $160 million in overdraft fees. 

We're in for a whole rash of responses. Some, like TCF, will impose a maintenance fee. Others may hike account minimums. Some--thankfully--will be more creative. Consider Fifth Third Bank. It will charge $7.50 a month for users of its Secure Checking Account service, but it will also throw in identity theft protection. Banks may add other services. To some, it will seem a bit gimmicky--a way to make the new fee more palatable-but what else can a bank do?   

Well, one thing you can count on is more programs aimed at getting people to use their debit cards. Some banks are already enhancing their rewards programs linked to checking accounts, as long as the user agrees to use their debit card 10 or 15 times per month or something similar. Some will even pay some interest. The reason is obvious. 

It effectively forces retailers to foot some of the bill for the lost overdraft revenue, the New York Times notes. If banks can get more people using debit cards and actually sign for the purchase (which results in more bank revenue at retailers' expense), they just might be able to hang onto free checking services. But even so, they'd be forced to enhance fee revenue wherever they could. 

In the end, nothing is really free. - Jim