Checking accounts with no monthly service fees have replaced free toasters and other promotional gifts that Spokane-area financial institutions used in marketing campaigns to attract customers years ago.


Today, free checking accounts are so common that its nearly impossible to find a financial institution here that doesnt offer them. While promotional gifts are mostly gone, banks and credit unions here have been locked in a fierce competition for checking-account customers for quite some time, industry executives say.


Its very competitive, says Heidi Stanley, chief operating officer of Spokane-based Sterling Savings Bank. When you look at banking products, they are very similar bank to bank. The evolution of checking accounts is that the consumers are much more educated, and they want value.


Free accounts often include services for which many financial institutions previously charged. Online banking, unlimited use of a debit card, automated bill paying, and unlimited check writing are the basic services institutions offer their checking customers. Some banks and credit unions have taken an extra step to attract account holders by offering reduced loan rates and lower annual fees on credit cards.


We dont do toasters anymore, says Heidi Cleveland, vice president of marketing at Numerica Credit Union, but we do offer a half-percent reduction on any new auto loan with an active account. You cant be competitive, and not offer free checking.


Checking-account incentives are like a trail of bread crumbs that banks and credit unions use to lead consumers to their respective branches.


Checking accounts are the key, says Lisa Phillips, vice president of advertising and public relations at Washington Trust Bank. If youre looking to build relationships you can entice them with free checking, hoping for their loan business.


Financial institutions here say once a customer opens a checking account, that establishes a foundation on which to conduct broader business. Banks and credit unions are counting on customers making use of other products, such as credit cards, mortgages, and vehicle and consumer loans, says Stanley.


Statistically, the checking account is what drives the primary financial institution, Cleveland says. Customers are more likely to use the same institution for their other needs. They also are less likely to leave. Its a sticky product.


Typically, financial institutions track the number of checking account holders who have loans and credit cards.


Institutions play a game of one-upmanship with each other to attract and retain account holders.


There always is competition, and competition is good because it keeps everything fresh and leads to innovation, says Harvey Radin, a San Francisco-based spokesman for Bank of America.


With financial institutions offering the same types of products, there is tremendous pressure to keep existing account holders and attract new ones through whatever added-value features they can provide, says Stanley.


Given that playing field and the types of products offered, you have to bring something else into the mix, Stanley says. She says that something extra is customer service.


With customer service viewed as paramount, tellers also are encouraged to remember account holders names and to be friendly and helpful.


Free checking is what people expect these days, says Steve Dalhstrom, president and CEO of Spokane Teachers Credit Union. However, people dont want to deal with a person in Minneapolis if they have a problem with their account.


Many free checking accounts require a minimum balance, which can range from $50 to $1,000. If those customers accounts dip below the minimum balance, they typically are charged a monthly fee of between $3 and $8.


Free checking accounts with minimum-balance requirements can lead to confusion because of such fees, say Brian Grytdal, vice president of marketing at Spokanes Horizon Credit Union. Horizon charges a $4 monthly fee if the balance drops below $250 with its basic checking account.


Most banks offer a variety of checking accounts for customers, including some interest-bearing accounts. Those typically have fees and larger balance requirements.


You have to design checking accounts that fit individual needs, Stanley says.


Some financial institutions, such as Bank of America, which offers about a half-dozen checking account options, will waive or reduce monthly fees if an account holder uses payroll direct deposit. Direct deposit is the method of payment which electronically credits a checking or savings account. Its a service provided by some employers, government agencies, and other groups. It eliminates the need to process paper checks.


Other institutions dont charge monthly fees if a person doesnt use their branches. For example, Bank of America charges customers who have its Versatel free checking account a $3 fee for every in-person transaction. Bank of America spokesman Harvey Radin says the Versatel account is designed for the customer who prefers to bank electronically and to use automated teller machines.


Washington Trusts Phillips cautions that so-called free checking accounts can mislead consumers into believing there are no fees for check replacements, overdrafts, or other services, such as automatic bill paying.


You need to look at the fine print and follow the asterisk to find out what free checking really means, Phillips says.