Dick Hansen never intended to open a new free checking account. But it was part of the package when he switched a home equity loan with his longtime bank to National City Bank to get a better rate.
"We had to set up a checking account, in order to get the loan," said Hansen, 69, of Ohioville, Beaver County. National City transferred his employer's direct deposit into the new account, and the loan payments will be deducted.
He'll keep his other checking account, too, for now, anyway. He wants to compare the terms more closely. "Also, there are more National City banks around," said Hansen, who's retired but often is on the road delivering former Enterprise rental cars to new owners.
National City's much-promoted switching service handles all the work of moving direct deposits and automatic bill payments from former bank accounts to make things easier for new customers like Hansen -- and because the bank wants new checking customers. So do its competitors across Western Pennsylvania.
The basic, free checking account has re-emerged and gained respect in recent years as the basis for a lucrative bank-customer relationship. Financial institutions know that by offering checking with virtually no fees, they also can sell savings accounts, loans and certificates of deposit.
"If a bank has five or six relationships with a customer, one of them is bound to be the checking account," said Bert Ely, a bank consultant with Ely & Co. Inc., of Alexandria, Va. "That is the foundation. You build from there."
For skeptics who wonder about ads for free checking, the accounts are mostly free -- unless the customer uses an automated teller machine outside the bank's network, bounces a check or otherwise overdraws on the balance.
Most free checking accounts can be started with a $50 deposit at major banks in the Pittsburgh area.
There are no setup costs other than ordering checks, and the bank even may buy back some checks from a former account elsewhere. There are no maintenance fees, no charges for writing too many checks or using a teller too often. There are no minimum balances to maintain, although some banks offer advantages for keeping a combined checking and saving balance at a certain level.
The rules are more streamlined than a few years ago. "A lot of checking accounts have changed because banks are simplifying them," said Jill Sandilla, vice president for the Pittsburgh region of Fifth Third Bank. "Instead of 20 different accounts, they are down to five."
Fifth Third is the newest player in the increasingly competitive Pittsburgh banking market, opening an office Downtown last month along with two automated teller machines. More locations are on the way.
"The whole industry is a lot more competitive," said Tom Ondek, senior vice president at Parkvale Savings Bank. "That's why we can't load up on fees. There is always somebody down the road with a better price."
Free checking came into vogue in the early 1970s as a way to attract customers after savings and loans acquired the power to offer checking.
"Then the banks realized they were losing money on small balance checking," said Chuck Larkin, a senior vice president at National City. "The tide swung to charging for checking, $3 to $4 a month in maintenance fees, and then if you packaged checking and savings you could be paying $15 to $20 a month."
PNC used to charge customers with low checking balances $3 to $10 in monthly service fees, and $2 when they used a teller or phoned in for live assistance.
The bank dropped those fees almost three years ago, after research concluded customers "don't like being nickled and dimed for fees," said Laila Krause, senior vice president and manager of PNC Bank's Western Pennsylvania territory.
"They want something easy, that gives them control over their cash and gives them the information they need. And nothing is as easy to understand as free."
PNC now has four free checking plans -- a basic account, and others geared for senior citizens, students and even customers who have mishandled banking in the past.
First Commonwealth has acquired several banks that in past years might have required depositors to keep a minimum balance of $300 to $500 in order to avoid monthly maintenance fees of $3 to $8. The bank just marked the third anniversary of its current lineup of nine checking accounts, including its Totally Free checking.
"Some banks offer free checking and run it for a few months. It's a strategy for them," said Randy Koontz, a vice president with the Indiana County-based bank, which has been promoting a series of prizes -- most recently a tool kit -- for new checking customers.
Free checking plans have been modernized in recent years, with free telephone or online banking and bill paying services. Those services once cost up to $5 a month, especially if the customer wanted to pay bills online.
Most of the banks are encouraging their use because the customer avoids using stamps, and the banks spend less time processing paper checks.
PNC's free online banking service, for example, allows account holders to look over upcoming bills, and schedule payments around direct deposit days so they never have to worry about an overdraft, Krause said. The bank also offers free, e-mailed "auto alerts" that tell customers when an account hits a specified high or low level.
Citizens, which acquired the retail branch network of Mellon Bank in 2002, is being careful not to pressure customers who prefer old-style paper transactions to do their banking at automated teller machines or by computer.
"We are a true retail bank. It's a return to basics here, and by that we mean face-to-face transactions," said Craig Campbell, senior vice president of retail banking. "We don't make any attempt to push them to online or ATM or tele-banking."
