ook around almost any mid- to large-sized U.S. city, and you'll likely find at least one bank boasting a "Totally Free Checking" product. Are banks suddenly becoming more consumer friendly? Won't their stockholders feel the pinch from lost fee income?        Actually, banks are cashing in on something credit unions have known for decades: Toaster and premium giveaways simply aren't going to draw consumers who expect real value for their hard-earned deposits, as well as quality customer service.

Frankly, these banks (mostly local, but also some regional and national institutions) are losing market share as nonbank competitors--credit unions, mutual funds, brokerage firms, credit card issuers, and others--gobble greater pieces of the financial market pie.        Bank mergers are another factor, says Linda Sherry, editorial director for Consumer Action, a San Francisco-based advocacy organization that regularly surveys bank fees. "In California, we noticed an increase in the number of smaller banks offering free checking," says Sherry. "We attributed it to the new megabanks formed from mergers leaving smaller banks at a disadvantage and [the smaller ones] needing to lure back customers."        Bankers also are smarting from scathing criticism by consumer groups for excessive and costly fees. No wonder. The number of different bank fees nearly tripled between 1990 and 1995, from 96 to 250.        "Our studies show bank fees rising twice the rate of inflation during the 1990s," says Edmund Mierzwinski, consumer program director for the United States Public Interest Research Group (USPIRG), Washington, D.C. "Not only are fees going up, banks are inventing new fees and new ways to keep people from avoiding fees, such as raising minimum balance requirements and teller-use fees."

Free for a fee Financial institutions traditionally rely on checking accounts to attract customers, who then forge other, more-lucrative bank relationships. Offering free checking is good marketing, especially to everyone's favorite target group--the millions of middle- and upper-income baby boomers edging toward retirement and looking for the best deals in town.        So, are banks' "totally free checking" accounts really a plum deal? In some cases, the answer is yes. But zoom in on the fine print, and you're likely to find a few pits.

Federal regulations specify that "totally free checking" means no monthly fees, no fees for dropping below a minimum balance, and no per-transaction fees.

Federal regulations specify that "totally free checking" means no monthly fees, no fees for dropping below a minimum balance, and no per-transaction fees. Most of these accounts, however, charge an average 97 cents for each withdrawal from another institution's automated teller machine (ATM), as well as fees for check printing, not sufficient funds (bounced checks), overdrafts, dormant or inactive accounts, closing accounts, and more. Other caveats: Many of these accounts require another relationship with the bank. The two most popular, says Sherry, are 1) direct deposit of paycheck or benefits and 2) ATM/telephone-only accounts (no teller banking); The vast majority of these accounts do not earn interest; Some free-checking deals are available only for a limited time, usually a year. USPIRG's Mierzwinski compares banks hawking this kind of promotion to drug dealers: "They give [a service] away free until they've got you hooked and then they charge you."

Economy or first class While free checking is a rising trend in the banking realm, most credit unions have offered free or low-cost checking accounts since they first introduced share drafts in the 1970s.        Nearly 70% of credit unions offer free checking without requiring a minimum balance. Many free accounts also compound interest or pay dividends.        Only 17% of credit unions charge a monthly fee for economy (flat or no-fee) checking or share draft accounts and a scant 6% charge per-transaction fees. Compare this to the 92% of banks charging monthly fees for those accounts and 96% charging per-transaction fees.        In fact, most credit unions have introduced fees only reluctantly. In 1996, 15% of credit unions assessed not a single fee. Those charging fees do so to recoup expenses for costly services such as ATMs (expensive at credit unions because few own ATMs), to penalize account abusers (for check bouncing or frequent overdrafts, for example), and to encourage use of technology such as ATMs, phones, and on-line banking to bring down costs of financial services for all members.        Because credit unions are nonprofit, cooperative institutions, they do not need fees to boost revenues. On the other side of the coin, banks' stockholders expect their company to profit, and fees certainly help puff up earnings. Here's a comparison from Credit Union Executive's fees survey:

Many bank and credit union accounts offer free checking as long as you maintain a minimum balance and don't write more than a set amount of checks. But banks' minimum balances are notoriously high, while the maximum free checks are woefully low.       If you're the type of consumer who wants to have your money work for you, and you're willing to maintain a minimum balance to earn those extra dollars, here's what the fees survey found you can expect from an interest-bearing account:

It's noteworthy that 45% of credit unions, compared with 100% of banks, charge monthly fees for interest-bearing accounts; only 6% of credit unions, compared with 36% of banks, charge a per-transaction fee.

The big picture Both banks and credit unions are anxious to create a multifinancial service relationship with consumers. It's common to offer package deals. One example is waiving the minimum balance requirement if you also have a loan, credit card, and share certificate or certificate of deposit with the institution.        So, when shopping for checking accounts, consider more than just that one product.        "You need to examine your total account relationships," says Doug Tangwall, technical research analyst, Credit Union National Association (CUNA) marketing research, Madison, Wis. "Typical consumers can save from $200 to $500 per year by switching from a bank to a credit union when you compare all rates and fees."        That's because credit unions tend to have lower loan rates and offer higher savings and checking rates, as well as fewer or lower fees.        A 1996 study sponsored by the Consumer Federation of America and CUNA found that consumers from four profile groups could all save hundreds of dollars by using a credit union for all their account needs.        On the upper-income scale, "high-balance" bank users (dual-income households, business owners, some seniors) could save as much as $475 by joining a credit union. Similarly, low-income "unbanked" individuals (those using no financial institution) could save $452 by forgoing check-cashing outlets and easy-credit stores for credit unions. Other ways you can save on checking accounts: Make an effort not to drop below your minimum balance, if your account has that requirement; Keep a careful accounting of how many share drafts/checks you write, if you have a transaction limit (using automated bill payments and debit cards can reduce the number of checks you write); Use only your credit union's ATMs (or shared branches) whenever possible; Sign up for overdraft protection to avoid overdrawing your account; and Take advantage of any multiple-relationship discount deals your credit union offers.

The more credit union services you use, the more you benefit. And, the credit union benefits, too, because more members using more services makes the entire credit union stronger.        Finally, if you have a legitimate gripe regarding your credit union's fees or pricing structures, you can make a difference. Speak up at annual meetings. Vote for directors with similar ideas. Run for a board seat yourself. Join a committee. As a member-owner of your credit union, you are more empowered than the average bank customer.

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