Banks cutting account fees to draw customers

Lenders offer free checking in bid for other business

Bank of America waives a $12 monthly checking account maintenance fee if customers direct deposit at least $250 each month.
Justin Sullivan/Getty Images
Bank of America waives a $12 monthly checking account maintenance fee if customers direct deposit at least $250 each month.

After abandoning free checking in recent years, many large banks are trying to lure customers by offering accounts that are mostly free.

These accounts waive fees if customers meet relatively few conditions. On Monday, for example, RBS Citizens Bank introduced a new checking account that waives the monthly maintenance fee of $9.99 if customers make just one deposit of any amount every month.

Last fall, Santander Bank, after changing its name from Sovereign, launched a new checking account that lets customers avoid monthly fees if they have direct deposits, such as pay checks, of $1,500 a month. Bank of America, the biggest bank in Massachusetts and one of the largest nationally, waives a $12 monthly checking account maintenance fee if customers direct deposit at least $250 each month.


Still, even as banks waive monthly maintenance fees, they have other charges waiting. Citizens customers pay $3 for a paper account statement, plus a separate charge to buy checks. Santander charges $3 if a customer makes a withdrawal from another bank’s ATM.

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Banks used to toss customers freebies such as toasters and digital clock radios to encourage them to open accounts. But now the teaser is a checking account with simple ways to get around the maintenance fees, said Wayne Busch, a managing director for banking practice in North America at Accenture, a global consulting firm.

The banks are trying to compete with low-fee alternatives, such as Bluebird, the prepaid card that functions like a checking account launched by Walmart and American Express in 2012, Busch said.

Banks are also trying to reach more engaged customers who can be sold on some of a bank’s other services, such as auto loans, student loans, mortgages, and wealth management, said Greg McBride, senior analyst with, a financial website.

“The customers they most desire are the mass affluent or emerging affluent households that are candidates for multiple products and services,” McBride said.


So, instead of offering free checking to “everyone that walks through the door,” banks are reserving it for customers who have direct deposits, pay bills electronically through their accounts, or hold multiple accounts with the bank, McBride said.

At Citizens, the new account could help the Providence-based bank recoup some of the deposits it has lost in recent years. In Massachusetts, Citizens Bank is the second-largest retail bank by deposits, but since 2011 its market share has declined about 2 percentage points.

But, said Brad Conner, vice chairman for consumer banking at Citizens, the bank did not want to offer just plain free checking. Depositors attracted to such deals may simply want to park their money in the account, meaning the bank gets little or no return for the costs of maintaining the account.

Even minimal monthly deposits, Conner said, keep customers engaged in their finances and the bank, which can lead to more profitable business with them, such as car loans and mortgages.

“We want to be their bank and have a relationship with them,” Conner said.


In addition to waiving fees for those with direct deposits, Santander offers those account holders a cash bonus of $20 each month that they pay a least two bills through online banking. Kristen Foster, the vice president for deposit products at the bank, said the promotion aims to introduce the bank’s Spanish name to American customers and build loyalty.

Three months since its launch, the checking account has attracted more customers, although the bank declined to say how many. Santander is the third-largest retail bank in Massachusetts.

“The banking industry is fairly competitive,” Foster said. “We wanted to catch the eye of customer.”

Deirdre Fernandes can be reached at Follow her on Twitter @fernandesglobe.