The Profitability of the Average Checking Account

By Tyler Spaid, Mike Branton
Originally published by BankDirector.com April 22, 2013

The bank down the street just did away with free checking and one of their upset customers closed the account and opened a free account at your financial institution. Good news, right?

Let’s look at this a little more closely. What balance did that customer bring? Did that person open any other relationship products? How many times does that person swipe a debit card per month?

Maintaining a customer’s checking account costs your financial institution money. The American Bankers Association estimates the annual cost to a bank to maintain a checking account is between $250 and $400 per year.  For community financial institutions with less than $5 billion in assets, the average according to other researchers is closer to $250 to $300.

So what costs are included in these figures? The research shows printing, staff, legal and compliance, processing, fraud prevention, and other overhead costs are the main factors in the cost to maintain a checking account.  Some argue overhead shouldn’t be included in the calculation since financial institutions will have branches, tellers, and ATMs no matter what their product mix may be—these are simply a cost of doing business. But think about the typical branch overhead for a moment. A great deal of these costs support those customers dealing with transactions and activities related to a checking account. Do you really think ATMs were invented for the loan customer? 

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