The pressures are too much.
A lengthy recession, an extended period of low interest rates, new and costly regulations, and the effect of two years of bank and credit union failures mean the idea of free banking services such as free checking likely is going the way of the free toaster.
The loss of free checking means that unlike in the recent past, more customers will have to maintain minimum balances, agree to write only so many checks a month, or receive their monthly statements electronically to avoiding paying monthly fees on their checking accounts.
Up until recently, the elimination of free checking services has been mostly at the hands of the nation's largest banks, such as Bank of America and J.P. Morgan Chase.
But that development is working its way to the Wichita area.
And local bank and credit union executives and industry experts said it's a development that's likely to become a trend, though there probably will be some holdouts.
"I won't say it will be non-existent, but it will be greatly diminished," Terence Roche, a consultant at Cornerstone Advisors in Scottsdale, Ariz., said about the fate of free checking.
Just to make clear, so-called free services like checking have never been free, Roche and executives said.
More than a decade ago, more financial institutions began to market free checking as a way to draw in more depositors and to keep up with the offerings of their peers.
But back then, interest margins were a lot more manageable, profits were higher because of a growing economy, and regulations restricting bounced-check charges weren't in place. And, executives said, there was less regulation for institutions, which meant lower operating costs.
And some banks pursued free checking based on the notion that such an offering would bring in a greater percentage of customers who would bounce checks, Roche said.
"Don't get the impression that free was something altruistic," he said.
In many cases, customers who habitually bounced checks meant that banks were able to offset the costs of offering free checking just from bounced-check fees, or what bankers call non-sufficient funds, or NSF, revenue, Roche said.
'Bottom line to make'
But NSF revenue was impacted earlier this year when the Federal Reserve put into place a new overdraft rule. The rule requires banks to give customers the option to choose whether they want overdraft protection on their ATM and debit cards. If they don't choose overdraft protection, then any transaction using an ATM or debit card on an overdrawn account will be denied immediately. And banks aren't able to collect overdraft fees on those transactions.
Moebs Services, an Illinois-based financial institution analysis firm, estimated that the cost of implementing the new rule and lower NSF revenue will end up costing banks and credit unions $6.3 billion.
Chuck Bullock, CEO of TECU Credit Union, said the new overdraft rule is only one of several issues pushing credit unions' costs higher.
"The debit interchange is under fire, the assessments that all federally insured financial institutions are having to pay, the ATM updates that are required for us to make by March 2012... you have all these things that are impacting us financially," Bullock said.
"I would have to think our industry as a whole will have to be evaluating that checking fee structure. You're probably going to see minimum balances increase, higher fees elsewhere, institutions trying to drive their members toward electronic services such as e-statements, online banking."
Bullock said that even though a credit union is a nonprofit cooperative and has "more flexibility" than a for-profit bank to resist passing higher costs on to customers, "we still have a bottom line to make."
Lyndon Wells, executive vice president of Intrust Bank, said the area's largest locally based bank had no other alternative than to eliminate free checking if it was to keep in place its extensive local branch network, online offerings and ATMs.
Intrust notified customers last month of the pending change.
What it's offering in place of free checking are several options that would allow customers to avoid a monthly service charge but not without meeting certain conditions, such as maintaining a minimum balance in their checking accounts or increasing their use of electronic banking services.
"It's a challenge to be able to deliver the service our customers expect and to do it fairly and competitively," Wells said. "And we believe we've tried to strike that balance."
Wells said Intrust officials looked hard at making the change, realizing that it might lose some customers from the elimination of free checking.
"We did extensive analysis of our portfolio in all account types and laid that aside competitive information in the marketplace," he said.
Cornerstone's Roche said banks that have eliminated free checking likely had a good idea that they would lose some customers because of it.
"I think there's an expectation that the customer loss will be acceptable," Roche said.
Roche said a number of factors, including the convenience customers would have keeping their checking account at the same institution, and banks providing ways for customers to avoid monthly fees, likely will minimize the loss of customers.
"I think that there will be some attrition," Roche said.
Executives from two financial institutions said they do not plan to eliminate free checking anytime soon.
Steve Carr, president of Community Bank of Wichita, said his bank doesn't plan to eliminate the free checking account product it offers.
The account does not require a customer to maintain a minimum balance. Carr said the bank's NSF fees have not been a "major item of revenue for us."
"We will have to do better at what we do and that means in every facet of the banking business," Carr said of continuing to maintain a free checking product in the midst of rising costs. "That's not to say that down the road, if (regulators) continue to heap on additional expenses, there may have to be some changes."
Bob Thurman said Credit Union of America plans to maintain its free checking service, too.
"In the foreseeable future, we're going to continue business as normal," said Thurman, CUA's president.
Thurman said his only concern is what the Federal Reserve does with interchange fees, which are the fees banks and credit unions charge retailers to process debit and credit card fees.
The Dodd-Frank Wall Street Reform and Consumer Protection law contains a provision that allows the Fed to set the interchange rate, and not banks or credit unions. Executives such as Thurman are concerned that the rate the Fed sets will be less than they are charging now.
"You're kind of waiting for the smoke to clear from regulations," Thurman said.