The Week posted a story yesterday about the demise of free checking accounts offered by banks.

The article reports:

This week, industry trade group Bankrate reported that only 39 percent of checking accounts in America are free (meaning they require no minimum balance and don’t charge a monthly fee). The free checking account used to be nearly ubiquitous — clocking in at a high of 76 percent in 2009 — but banks have been cutting back their largesse in a bid to squeeze more money out of customers.

Why is the number of free checking accounts decreasing–new regulations have cut into the profits and banks and forced banks to charge fees to make up the difference. We need to remember that banks are in business to make a profit. If they are not making a profit, there is no reason for them to be in business. One of the reforms in the new bank laws was a change in the bank’s ability to charge for overdrafts. The banks had to find a way to make up for the loss of those fees. If you follow the idea that behavior that is rewarded will increase and behavior that is penalized will decrease, where is the wisdom in cutting overdraft fees? Doesn’t anyone making these regulations understand either business or human nature?

The article reports:

Bankrate found that customers on average had to keep a minimum of $723 in their accounts to avoid a fee, which is up 23 percent from the previous year. The average monthly fee for a non-interest checking account is $5.48, up 25 percent from 2011. Bank of America, for example, is planning to charge certain customers between $9 and $25 to keep a checking account. Wells Fargo and JPMorgan Chase are considering similar measures.

Until we elect people who understand business, we can expect more of the same.