TCF relents and brings back free checking

The bank said it decided to once again offer the accounts it pioneered because customers said they wanted it.

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A TCF branch in St. Louis Park.

Photo: Lewis Leung, Star Tribune

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Free checking is back at TCF -- this time for everyone.

The Wayzata-based bank announced Wednesday that it's axing the 15-transactions-per-month requirement that customers had to meet to avoid a $9.95 monthly maintenance fee it introduced in 2010. The move finishes an about-face the bank started last year when it said it was returning to free checking by waiving the maintenance fee for customers who met certain conditions.

Now TCF has killed all the conditions, returning to the sort of free checking the regional lender helped pioneer in the 1980s. It decided to finish off the monthly fee for good after a "rigorous" process of collecting feedback from customers, including those who closed accounts, and employees.

"We needed something to stem the attrition and invigorate our customers and employees to sell this account," TCF spokesman Jason Korstange said in an interview. "We think we'll start gaining accounts again."

The bank has also killed promotions it has run paying $50 and $100 in cash to customers for opening new accounts.

The change doesn't affect TCF's overdraft policy, which the $17.8 billion bank has also been tinkering with. Currently, TCF customers can choose whether to be charged $28 per day for overdrafts, or $35 per bounced item.

TCF hasn't disclosed how many checking accounts it has been losing or how much money in fees it expects to lose by returning to free checking. The bank's fee and service charges dropped 22 percent in the first quarter to $41.9 million from $53.5 million a year earlier. In government filings it said that the decrease "was primarily due to changes in customer behaviors and increased levels of checking account attrition."

Stifel Nicolaus analysts said they expect TCF's lost fee revenue to be offset by the estimated $6 million to $7 million the bank will gain per quarter from discontinuing the cash-for-opening-new-accounts promotion.

Counter to the trend

Big banks have been phasing out traditional free checking although some, such as Pittsburgh-based PNC, still offer it.

Given heightened consumer awareness, fees have been in flux, although they tend to go up and not down. Wells Fargo & Co., based in San Francisco with major Twin Cities operations, recently upped the monthly fee for new "value" checking customers, although it also cut fees for customers choosing online-only statements.

On Friday, U.S. Bancorp, based in Minneapolis, is raising its overdraft charges from a fee of $10 for overdrafts of $20 or less and $33 for those above that, to a fee of $15 for overdrafts of $15 or less and $35 for those above that.

Greg McBride, a senior financial analyst at Bankrate.com, said TCF's return to free checking is "definitely counter to the prevailing trend."

"It illustrates to customers why it's important to shop around," he said.

He noted that banks have been steadfastly ratcheting up fees for nearly 15 years, but regulatory changes on overdraft fees and then on debit card transactions "kicked it into higher gear."

There was a flurry of activity last fall when the new limits on fees for processing debit card transactions took effect, a change that hit TCF's bottom line hard.

An early pioneer of "totally free checking," TCF introduced free checking in 1986, even before it opened its first supermarket branch, to court middle- and lower-income consumers.

At a time when many large banks are rolling out the red carpet for the affluent and trumpeting their wealth management prowess, middle- and lower-income consumers remain TCF's retail foundation -- "Joe Lunchbucket customers," as TCF's CEO and Chairman Bill Cooper characterized it during an investor presentation last month.

TCF ditched its flagship product in early 2010, saying regulatory changes limiting overdraft fees made it necessary for the bank to tack on a monthly maintenance fee. Then it backtracked.

TCF is in the middle of a major restructuring as it tries to reshape itself into a more diverse, national bank focused less on longer-term assets such as residential mortgages and more on shorter-term loans and specialty financing.

Jennifer Bjorhus • 612-673-4683

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