Though many banks are ditching free checking, Citigroup Inc. is forging ahead with a plan to use the perk for small-business customers.
Citi said Wednesday that it is offering free checking for up to one year on two business accounts being offered to new and existing clients who sign up by March 31.
The promotion is an effort to help small businesses, which were battered by the recession, as well as to get them to use more of the bank's services, said Raj Seshadri, the head of small-business banking at Citi.
The New York banking company plans "to make every dollar that they have, every dollar they can make, every dollar they can touch work for them so they can … both recover [and] start growing and succeeding," Seshadri said in an interview.
The promotion covers the CitiBusiness Streamlined and CitiBusiness Flexible checking accounts. To qualify, a new customer must also sign up for a cash management service such as payroll, online bill pay or remote check deposit, she said.
Existing customers of those small-business accounts also can qualify if they sign up for a cash management service they are not already using, she said.
Depending on the market, the Streamlined account normally charges $19 monthly, unless a customer maintains a minimum balance of $5,000. The Flexible account normally costs $30 a month, unless a client maintains a minimum balance of $10,000.
On the consumer side, some large banking companies, including Citi and Bank of America Corp., require customers to maintain balances or do a certain number of transactions to avoid a monthly fee. "We still believe in not being completely free all the time to everyone," Seshadri said. "You do need balances, and you do need activity."
Competition for small-business customers is intense, said Christine Barry, a research director at the Aite Group LLC consulting firm.
Banks "may be losing potential revenue" by offering free checking, but "perhaps they'll be able to make it up in other areas," Barry said, adding that small businesses are extremely price-sensitive.
"I'm not surprised to see product offerings like this because it just provides more evidence of the increasing focus that banks are placing on this customer segment," she said.
