Should Banks Charge Fees For Check Writing?

Consumers shopping for new checking accounts aren’t as interested in writing unlimited checks as they were only three years ago. It’s just not a selling point for financial marketers anymore… but it could be a source of revenue.

By Rob Rubin, Managing Director, Novantas

Interest in the unlimited check writing feature among consumers shopping for new checking accounts has been slowly declining. This correlates with industry data showing that as electronic payment methods like debit cards and online bill pay increase, the number of checks written decreases. Fewer consumers need to write a lot of checks, so demand for unlimited check writing has declined.

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Yet most banks and credit unions still offer unlimited check writing on all of their checking account products. In fact, of the 137 institutions listed on FindABetterBank, only 12% of institutions offer a checking account product that limits how many checks can be written per month. Most limit usage by charging fees per check over an amount per month (e.g., 3 checks per month free) and a few allow checks to be written only from specific accounts.

In most cases, the cost of processing payments by paper check is higher than the cost of processing electronic payments. Therefore, if all other things are equal, customers who write fewer checks cost less to service. At the same time, charging for check writing generates incremental revenue and encourage customers to use less expensive payments. Should banks continue to offer this service for free, or should they charge customers in order to push them towards more cost-efficient payment methods and generate incremental revenue?

Insights from Rob RubinRob Rubin is Managing Director of Novantas Data Services. His research leverages insights captured from thousands of bank shoppers every day while they are actually thinking about- and in the process of shopping for a new bank.

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Comments

  1. Rob, you make an interesting point. Charging for check writing may seem logical but may be considered a negative. It might be better to change check writing behavior by making the alternatives easier to use and to reinforce that behavior in a positive fashion.

    @dmgerbino

  2. Banks have made themselves largely irrelevant with their plethora of fees and virtually non-existent interest payments on deposits. Only an idiot would look for new fees or increase the ones they have and expect anything less than depositors fleeing to credit unions. Goose, golden egg, lesson learned grasshopper.

  3. No. Check writing is free because it is the replacement to cash. Debit cards are supposed to be free because they are replacement to checks. Something went very wrong along the way when debit cards were introduced.

  4. Mike Branton says:

    In my opinion, this is the penalty based continuation of trying to get fee income from things that are core to banking and have been free for as long as anyone can remember. What’s next, a cover charge at the branch door because branch traffic is declining? Or a two transaction minimum or a fee is charged?

    Instead of charging for basic things that used to be free, banks should channel some energy into offering new and valuable nontraditional services that customers will gladly pay for.

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