Consumer banking in the United States has evolved significantly, shaped by key historical developments, technological innovations, and shifting consumer behaviors.

A brief history of consumer banking

The roots of consumer banking in the U.S. can be traced back to the late 18th century, after the American Revolution, when the nation’s first central bank, the First Bank of the United States, was established in 1791 to support the new nation’s economy. Before this, during the colonial period (1607–1776), financial practices were informal, relying on bartering, commodity money, and local credit systems. The modern concept of consumer banking, with accessible products like savings accounts, loans, and checking accounts, emerged in the late 19th and early 20th centuries.

A significant turning point came with the establishment of the Federal Reserve in 1913. This created a central banking system designed to regulate banks and stabilize the financial system. The Great Depression further influenced banking by introducing federal deposit insurance to protect consumer deposits. After World War II, the U.S. economy boomed, and consumer banking services expanded rapidly, helping Americans access home loans and credit to fuel their pursuit of the American Dream.

The introduction of credit cards in the 1950s revolutionized consumer spending, allowing individuals to borrow money for immediate purchases and repay it over time. The deregulation of the banking sector in the 1980s and 1990s facilitated further innovation, leading to today’s digital-first landscape, where online banking and fintech solutions dominate.

Key consumer banking services

Consumer banking offers a wide range of services catering to the diverse financial needs of individuals.

• Checking and savings accounts. Checking accounts provide easy access to funds for daily transactions, such as bill payments and withdrawals. In contrast, savings accounts allow consumers to set aside money for future needs and earn interest. These are the foundational products of any consumer banking relationship.
• Certificates of deposit (CDs). CDs offer a low-risk investment for consumers who want to earn a higher interest rate than what is offered in a savings account. However, they require a fixed deposit period, during which withdrawing funds typically incurs a penalty.
• Credit cards. Credit cards are an essential tool in consumer banking, offering short-term loans that consumers can use to make purchases. While they provide convenience, credit cards must be managed responsibly to avoid high-interest debt.
• Loans and mortgages. Consumer loans and mortgages are among the most important services offered by banks. Loans help individuals finance everything from cars to home renovations, while mortgages are crucial for those looking to buy a home.
• Investment products. Many banks offer a variety of investment products, including mutual funds, exchange-traded funds (ETFs), and retirement accounts like IRAs. These products allow consumers to grow wealth and save for long-term goals like retirement.
• Insurance products. Some banks provide access to insurance products like life, auto, and homeowners insurance. These products offer consumers a way to protect themselves and their assets from unforeseen events.

Current trends in consumer banking

The banking industry has undergone profound changes in recent years due to the rapid adoption of technology and changing consumer expectations.

• Digital banking. With the rise of smartphones and internet access, consumers increasingly opt for online and mobile banking services. This shift allows for instant transactions, mobile check deposits, and 24/7 access to accounts. Many traditional banks now offer robust digital platforms, while digital-only “neobanks” provide simplified, low-fee or fee-free banking experiences without physical branches.
• Fintech integration. Financial technology (fintech) companies are revolutionizing consumer finance. They offer peer-to-peer payments, digital wallets, simplified investing, and credit management tools. This pushes traditional banks to innovate and integrate fintech solutions into their own platforms.
• Open banking. Open banking is an emerging trend that allows consumers to share their financial data with third-party providers through secure APIs. This creates more competition, fosters innovation, and leads to personalized banking services. It also enables consumers to use multiple financial products seamlessly across different platforms.
• Personalized banking. Data analytics and artificial intelligence (AI) are transforming the way banks offer services. Banks can use advanced data tools to create customized offers and recommendations tailored to individual spending habits, financial goals, and behaviors. This shift towards personalization helps consumers make better financial decisions and strengthens their relationship with their banks.
• Environmental, social, and governance (ESG) focus. Increasingly, consumers are considering the social and environmental impact of their banking choices. Many banks now offer ESG investment options or align themselves with sustainable practices to attract eco-conscious consumers.

Challenges facing the consumer banking sector

Despite technological advancements, the consumer banking sector faces several pressing challenges:

• Cybersecurity and data protection. As more consumers move online, cybersecurity threats loom larger. Banks are frequent targets for cybercriminals, and breaches can compromise sensitive personal information, eroding consumer trust. To combat this, banks must invest heavily in security infrastructure, including encryption, two-factor authentication, and real-time fraud monitoring.
• Financial inclusion. Although consumer banking has become more accessible, millions of Americans remain unbanked or underbanked. Factors such as lack of trust in financial institutions, high fees, and insufficient identification can prevent people from accessing banking services. Bridging this gap is a priority for banks aiming to serve all demographics.
• Regulatory compliance. Banks must navigate an increasingly complex regulatory landscape. In addition to complying with long-standing rules, like the Truth in Lending Act (TILA) and Fair Credit Reporting Act (FCRA), banks must also stay current with data privacy laws and anti-money laundering (AML) regulations. Balancing compliance with the need for innovation is a delicate act.
• Economic uncertainty. Interest rate fluctuations, inflation, and economic recessions significantly impact the consumer banking sector. As the economy faces global uncertainties, including those related to the COVID-19 pandemic and geopolitical instability, banks must remain agile and prepared for the financial challenges of these changes.

The future of consumer banking

The future of consumer banking in the U.S. will likely be shaped by continued technological innovation, increased personalization, and a growing emphasis on financial wellness. Banks must adopt cutting-edge technologies like blockchain, AI, and machine learning to offer more secure and efficient services. At the same time, consumers will expect seamless, personalized experiences that cater to their individual financial needs.

In this evolving landscape, banks must prioritize responsible lending practices and financial literacy, ensuring customers have the tools and knowledge to manage their finances effectively. Additionally, as sustainability becomes more important for consumers, banks that integrate ESG principles into their operations and offerings will stand out.

Consumer banking in the United States has come a long way, adapting to technological advancements and shifting consumer preferences. From traditional savings accounts to cutting-edge digital banking platforms, the industry continues to evolve in response to new challenges and opportunities. As we look toward the future, banks must embrace innovation, prioritize cybersecurity, and address financial inclusion to remain relevant in an increasingly digital world.

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Disclaimer: The article and information provided here are for informational purposes only and are not intended as a substitute for professional advice.

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It’s a little harder to find a free checking account now than it was in the early 2000s, but they’re far from rare.

If you are comfortable with technology, you may benefit from online banking – aka internet banking or web banking. This is a fast-growing sector within banking, with analysts predicting a 13.6% compound annual growth rate between 2020 and 2027.

Online banks have much lower overheads than traditional banks with expensive brick-and-mortar outlets and high staffing levels. So you may find especially good deals in that sector.

Before you choose the type of bank you want, decide on the account characteristics you want and need. What should you look for in a free checking account?

5 features you might want in a free checking account

Consumers have a variety of needs from their bank accounts. For example, some people have high balances and want to earn interest. These people may value good interest rates on savings accounts. Other people have low balances and are not as concerned about earning interest.

You may like a personal, face-to-face service while others prefer the speed and convenience of managing their money through their smartphones. People who travel a lot often want access to tens of thousands of in-network ATMs spread across the country or the world.

Take a moment to think through the things you personally find valuable. Let’s run through five of those things that you might or might not want.

1. A truly free checking account

There’s free and then there’s “free.” It’s not hard to find a bank that does not charge a monthly fee, but some waive that fee only in certain circumstances.

Often those circumstances revolve around your account balance. If you’re the sort who always maintains a high balance no matter what, you won’t be bothered by this. But if your balance frequently dips to low levels, you need to establish what triggers a fee and how often that’s likely to happen to you.

2. Attractive yields

You pay an annual percentage rate (APR) when you’re charged interest on money you’ve borrowed. But you receive an annual percentage yield (APY) when you get interest on your investments.

Nobody’s going to get rich on the yields currently offered by banks on checking or savings accounts. But there’s no point in throwing away money by settling for less than the highest yield you can find.

Naturally, this is going to be of particular concern to those who maintain high balances. If your balance is typically in the low hundreds, you’ll be lucky to get the price of a cup of coffee from your year-end yield. So, you might prioritize other features over the account’s yield.

3. ATM fees

A free checking account is only rarely free when it comes to out-of-network automated teller machines (ATMs). You’ll likely pay a fee every time you withdraw cash from one of those.

But not all banks are equal when it comes to this. A few may cover all your ATM fees. But most will charge you. 

If you live and work close to in-network ATMs, this won’t bother you, providing you don’t travel very often. Otherwise, these fees can vary from zero to $3 a pop, depending on your bank, according to Business Insider. And the out-of-network provider typically takes its own fee. So, don’t ignore ATM usage.

If your location or lifestyle makes this important to you, check your candidate banks’ policies on ATM fees before you commit. A few even refund a limited amount of those fees each month.

4. A bank you can work with

Don’t underestimate the importance of customer service when it comes to banking. Chances are you’ll barely notice it most of the time besides a cheery smile when you visit a branch or a helpful call-center agent. 

But, if you encounter problems, the last thing you want is to spend hours on hold and dealing with call-center associates who are not empowered to help you.

It’s tricky working out which banks have great and terrible customer service. Review websites inevitably have some negative comments for any organization with millions of customers. And those with gripes are more likely to post. But try to get a feel for how big a priority your candidate banks give to caring. And check their ratings on the Better Business Bureau’s website. 

If you are comfortable with an online service, take a look at your candidate banks’ smartphone apps and other consumer interfaces. Not all banks offer as much functionality and ease of use as others. 

5. FDIC cover

All traditional banks are FDIC insured. That means that, if your bank goes under, the Federal Deposit Insurance Corporation reimburses you up to $250,000 per depositor per insured bank. 

But the FDIC warns of some financial technology (fintech) companies that offer accounts without its protection. It says, “ … non-bank companies are marketing and offering fintech apps for accounts that may not be FDIC-insured.” If in doubt, use the FDIC’s information and support webpage or call 1-877-ASK-FDIC (877-275-3342).

Some fintech companies are FDIC insured. For example, the Sesame Cash account comes with full FDIC protections. 

To sum up

Different people need different things from their free checking accounts. So, nobody can say “this is the best free checking account.” That depends on what you want.

Use this guide to determine what’s important to you. And then invest a few hours in shopping around for your perfect banking partner. Don’t forget to read How to Open a Bank Account Online.

Disclaimer: The article and information provided here is for informational purposes only and is not intended as a substitute for professional advice.

The post What to Look for in a Free Checking Account appeared first on Credit Sesame.