Lake Forest, IL/March 1, 2011/  According to the latest data from the economic research firm, Moebs $ervices, only about half of the large national banks are now offering free checking, a decline of 13.6% over the past year.  By not offering free checking, the big banks are steadily losing significant market share to community banks and credit unions.

“There is a fundamental consumer-shift going on in the banking sector,” said Mike Moebs, economist and CEO of Moebs Services. “This shift is going to move about 13,000,000 checking accounts to community banks and credit unions by the end of 2011.”

According to Moebs, self-imposed conditions, regulation requirements, and judicial penalties have leveled the ability of big banks to provide free checking to the average consumer.

“It costs about $300 on a fully absorbed cost basis to operate a checking account, and with fees falling below these costs, the average checking account at a Wall Street bank is unprofitable. Because Main Street financial institutions can operate below the $300 cost level, they can turn a profit, and will continue to take market share away from the larger banks,” explained Moebs.

There are 130 million consumer checking accounts in the United States. In 2009, large national and regional banks with deposits over $50 billion enjoyed about 45% of this market. Since then, during 2010, about five million accounts shifted from the big banks to community banks and credit unions.

“By the end of this year, we expect community banks and credit unions will have 65% of the checking account market. To paraphrase Mark Twain, ‘the death of free checking has been greatly exaggerated,’” said Moebs. “From July 2010 to February 2011, community banks offering free checking increased by one percent and by nine percent at credit unions.”

Regular Checking, accounts that charge a monthly fee if a certain balance is not maintained, increased from 25% at all depositories in July 2010, to 28.6% in February 2011. The median fee for falling below the minimum balance required for all financial institutions was $6.00. This monthly fee increased for the national banks but decreased for community financial institutions.

Cities that the saw the highest increase in community banks and credit unions offering free checking were: Los Angeles, New York, Philadelphia and San Francisco.  States with the highest increase were: Indiana, Florida, New Jersey, Virginia, and West Virginia. The biggest decreases in offerings of free checking occurred in Denver, Detroit, Milwaukee, and Sacramento, as well as the  states of Maryland, Massachusetts, and Ohio.