There is no doubt that checking accounts have become more expensive for American consumers after new financial regulations led banks to generate less revenue. In addition to the rise in monthly fees, the criteria for waiving these fees may also have been more stringent. Luckily, one common loophole may help you avoid that hefty monthly fee.
Faking a direct deposit
Most basic checking accounts will charge a monthly service fee unless customers maintain a certain account balance or post a monthly direct deposit. You may find that keeping a large balance on a monthly basis is difficult or unwise (when the money is better off in a savings account). Therefore, the direct-deposit requirement could offer an easier way to waive the monthly fee.
Now, banks tend to say that qualifying direct deposits must come from a paycheck or payout of government benefits. However, many banks’ electronic transfer systems recognize other types of transfers as direct deposits too. Bank transfers initiated through other financial accounts, such as a savings account at another bank or PayPal, may be considered a direct deposit by your bank’s systems.
Popular cash back site FatWallet.com has a forum thread of users who have reported that they’ve been successful in using bank transfers from other financial accounts to skirt monthly fees.
Customers can confirm whether these transfers work by setting up account alerts to notify them when a direct deposit is posted to their account. Note that some banks will require a single direct deposit of a certain amount or multiple direct deposits that total a certain amount. For example, one checking account may require a direct deposit of at least $250 per month while another may require direct deposit that totals $500 per month. You have to remember to transfer enough money to meet this requirement.
Your experience may vary
Whether or not this trick works can vary from bank to bank. If you find that these transfers work, you can schedule automatic transfers so you don’t have to remember to make the transfer every month. You may not want to hold too much cash in a checking account when it is better off earning interest in a savings account. So, you should consider transferring the money out once the “direct deposit” is posted to your checking account—again, using automatic transfers.
The loophole can prove to be beneficial to freelancers, who may be paid irregularly, and low-income individuals, who don’t earn enough to satisfy the required direct-deposit amount. According to a MyBankTracker survey of the 10 largest U.S. banks, the average monthly fee of non-interest checking accounts is $9.93. Using this trick can help consumers save a chunk of change on a yearly basis.
This trick is one way to enable “free” checking at one of big banks, which tend to have more branches and ATM locations that are preferred by certain consumers.
If you find that the loophole doesn’t work for you, consider an online bank, community bank, or credit union for truly free checking accounts.
Simon Zhen is a columnist and staff writer for MyBankTracker.com. His columns cover all aspects of personal finance—with a particular emphasis on bank rates, products, and services.