Want Free Checking? Check Out Credit Unions

Rumors of the death of free checking may be exaggerated; the consumer-friendly product is alive and well at the nation's credit unions.

Bankrate surveyed the 50 largest credit unions across the country and found free checking accounts at 39 of them.

Plus the majority of institutions surveyed -- 41 of the 50 credit unions -- have no balance requirement or monthly fee on their checking accounts.

Three credit unions do have balance requirements to avoid a monthly service fee, the highest of which is $750 at Lockheed FCU in Burbank, Calif.

Bill and cash
Bill and cash

Of the nine credit unions that charge monthly service fees, the highest is $10 per month and the lowest is $1.

Credit unions offer the same services as most large banks, but with a community-oriented slant and members-only policy. For instance, all of the credit unions surveyed offer online banking.

"Credit unions are not-for-profit organizations that are owned by and in operation for the benefit of their members," says Greg McBride, senior financial analyst at Bankrate.com.

In keeping with their community-oriented mandate, credit unions offer other benefits to their members, including generous amounts of transactions, lower fees (in some cases) and networks of ATMs.

The fine print: fees, minimums and ATMsMonthly transactions Almost all -- 47 out of 50 -- of the credit unions allow unlimited monthly transactions. Three credit unions do put some restrictions on their members. At the State Employees' Credit Union in Raleigh, N.C., members can write up to 50 checks per month but are charged $0.20 per check thereafter.

"The average consumer does 25 to 30 transactions per month on an account, says Hank Israel, director at Novantas, a consulting firm to the financial industry.

"Much in excess of that and they find that it is a merchant trying to use a consumer account so they want to make sure that the accounts are in the right place from a cost and service perspective," he says.

Another institution, American Airlines FCU in Fort Worth, Texas, allows four free transactions -- deposits or withdrawals -- by phone or in person, and charges $2 for subsequent transactions.

Only one of the credit unions surveyed charged for debit card transactions. The State Employees' Credit Union of Maryland, in Linthicum, assesses a 25-cent fee for each PIN-based purchase with a check card.

PIN-based purchases cost banks money, says Israel.

"Some of these are a little arbitrary. You can see the different product managers trying to encourage profit-enhancing behaviors and discourage behaviors that cost them money," says Israel.

Minimums to open Just over half, 27, of the credit unions Bankrate questioned do not impose a minimum opening balance on their free checking accounts.

For the interest-bearing checking accounts, the Bankrate survey captured the minimum required to earn interest. Nineteen of the 50 credit unions have interest-bearing accounts, and only three require deposits of more than $100 to earn interest.

The highest minimum-opening balances were found at the Teachers FCU -- Elaine in Farmingville, N.Y., and Addison Avenue FCU in Palo Alto, Calif. Both credit unions require a minimum of $2,500 to score yields of 0.15 percent and 0.05 percent respectively. Both institutions do offer noninterest bearing options with, most likely, lower opening requirements.

The average yield on the 19 interest-bearing accounts was 0.3 percent, with the highest, 1.01 percent, at Police and Fire FCU in Philadelphia.

The average minimum opening balance requirement on noninterest bearing accounts is $16. Though many credit unions in the survey ask for only $1 as an opening amount, it can go up to $100.

"The huge cost for institutions is opening up a dead account, so if customers aren't able to fund it with at least the minimums of balances, the likelihood that the account is actually going to activate and be used is slim to none," says Israel.

Fred Becker, president of the National Association of Federal Credit Unions, says that credit unions often have lower minimums to open accounts due to their community-oriented purpose.

Next: Check out minimums and fund fees