FirstBank wraps a bus in a giant ad promoting free checking and tops it off with a 25-foot long propeller on top.
The ad reads, “Heli-Skiing, now as affordable as Free Checking.”
Totally Free Checking Account in Alive and Well in Greater Sacramento California
First Northern Bank, founded in 1910 in Dixon, California, continues offering Totally Free Checking to its customers in the surrounding counties which includes Sacramento. In addition to Totally Free Checking, the bank also offers 50+ Free Interest Checking (for customers age 50 and older) and Direct Deposit Free Interest Checking. These three checking accounts were originally part of the seven unique checking accounts comprising the “High Performance Checking Account Marketing Program” introduced in 1982 by a direct mail marketing agency in Lincoln, Nebraska. At the time, the direct deposit based account was introduced as VIP Interest Checking. Over the past three decades, most community banks and credit unions participating in the High Performance Checking Account Marketing Program have shortened the Totally Free Checking name to Free Checking. It’s always exciting to encounter a local community bank that continues offering Totally Free Checking, not to mention two additional accounts from the original list of seven. The ad shown below appeared in the April/May 2012 issue of the glossy Sactown magazine.
2012 U.S. Bank Customer Switching and Acquisition Study by J.D. Power and Associates
Bank Customer Switching Rates Rise Again, Fueled by Issues with Fees and Poor Service
Consumer backlash against bank fees, coupled with poor service and unmet customer expectations, has fueled increases in defection rates among customers of large, regional and midsize banks, according to the J.D. Power and Associates 2012 U.S. Bank Customer Switching and Acquisition StudySM released today.
On the heels of “Bank Transfer Day” on November 5, 2011, the beneficiaries of the increased exodus from larger banks are primarily smaller banks and credit unions. Acquisition of new customers by smaller banks and credit unions has increased by 2.2 percentage points to an average of 10.3 percent in 2012 from 8.1 percent in 2011. Among big banks, regional banks and midsize banks[1], switching rates average between 10.0 and 11.3 percent, while the defection rate for small banks and credit unions averages only 0.9 percent, a significant drop from 8.8 percent in 2011.
The study, which examines the bank shopping and selection process, finds that 9.6 percent of customers in 2012 indicate they switched their primary banking institution during the past year to a new provider. This is up from 8.7 percent in 2011 and 7.7 percent in 2010.
The study finds that, not unexpectedly, fees are the main reason customers shop for a new primary bank. In particular, one-third of customers of big and large regional banks cite fees as the main shopping trigger.
“When banks announce the implementation of new fees, public reaction can be quite volatile and result in customers voting with their feet,” said Michael Beird, director of the banking services practice at J.D. Power and Associates.
However, according to Beird, customers weigh the price they pay against the value of their experience.
“It is apparent that new or increased fees are the proverbial straws that break the camel’s back,” said Beird. “Service experiences that fall below customer expectations are a powerful influencer that primes customers for switching once a subsequent event gives them a final reason to defect. Regardless of bank size, more than one-half of all customers who said fees were the main reason to shop for another bank also indicated that their prior bank provided poor service.”
In capturing customers who are shopping for a new bank, several of the more successful banks achieve higher acquisition rates through the use of promotions and cash incentives. At one of the highest-performing big banks, 19 percent of customers indicate these promotions were the reason they selected their new bank. However, according to Beird, doing a good job for customers is not just about dollars, but also about loyalty and retention.
“Only 32 percent of customers who selected a new bank because of promotional offerings said they definitely would not switch banks again in the next 12 months,” said Beird. “In comparison, 46 to 51 percent of customers who chose the new bank because of either good service experience or positive recommendations say they definitely will not leave within the next year.”
For customers thinking about switching banks to find one that is better aligned with their expectations and needs, J.D. Power and Associates offers the following tips:
- Shop around to compare terms and service before deciding on a bank, the same way you might before buying a vehicle. Don’t forget aboutdirect online banks, as their competitive fees and rates may offset any inconvenience due to lack of physical branches.
- Don’t be swayed by promotion gifts/cash alone. It is more important to ensure the bank that you are selecting offers the right products to meet your needs and that the fees associated with the products are in line with what you are willing to pay.
- Read account brochures and disclosures carefully and don’t be afraid to ask questions about the products you are about to open. It is important to fully understand how fees are charged and how fees can be avoided.
The 2012 U.S. Bank Customer Switching and Acquisition Study is based on multiple evaluations from 5,062 customers who shopped for a new banking account or new primary financial institution during the past 12 months. The study was fielded in November and December 2011, and includes Bank of America; Bank of the West; BBVA Compass; BB&T; Capital One; Chase; Citibank; Comerica Bank; Fifth Third Bank; Harris National Bank; HSBC; Huntington National Bank; KeyBank; M&I Bank; M&T Bank; PNC Bank; RBS Citizens; Regions Bank; Sovereign Bank; SunTrust Bank; TD Bank; U.S. Bank; Union Bank; and Wells Fargo.
Golden1 Free Checking Two Panel Brochure
California’s largest credit union, Golden 1, continues promoting its free checking account. During March, 2012, a simple two-panel marketing flyer or buckslip is being distributed inside the branches in brochure holders located at the teller windows. While this is great news, the words “FREE CHECKING’’ are the smallest words on the front of the flyer as you can see below. And the words “Zero,” “Zip,” and “Zilch,” are not carried forward and explained on the back panel. This particular financial institution has, for years, had its own in-house creative agency which accounts for much of its mediocre creative like the piece shown here. It is very important that banks and credit unions offering free checking continue aggressively marketing the account through multiple marketing channels.
Are Consumers Revolting With Free Checking Ending At Wells Fargo?
Two weeks ago, Wells Fargo said it will impose a $7 monthly account fee in six states, including Connecticut, effectively ending free checking. Just days earlier, it was disclosed that BofA was testing new fees in three states as a prelude to imposing fees on basic checking accounts.
Kim Reid of Hartford, who opened a Wells Fargo account about a year ago, would be charged the new fee — and Reid said it would make her think twice about keeping her account at the bank.
“I don’t think they should charge you,” Reid said. “They already have your account and your money.”
Reid isn’t against all fees. If you bounce a check, you should get charged a penalty. You’ve spent money that you don’t have. But a fee for just having an account, “that’s just wrong.”
But that mindset is changing, they say, especially after last fall’s controversy over the debit card fee that reached as high as the White House.
“What happened last fall after the president talked about the truly unfair, $5 debit card fee, there was a real change in consumer behavior,” Ed Mierzwinski, the consumer program director at the U.S. Public Interest Research Group in Washington, said. “Before the Bank of America mess, the banks’ conventional wisdom was they could get away with raising fees, not anymore.”
One customer-service expert believes that Wells will lose thousands of customers over the decision to charge the $7 fee.
“When you tell young people and those without money you want to increase the cost of using Wells Fargo $84 a year JUST to use your checking account, it is time to switch banks,” John Tschohl, president of the Service Quality Institute, which develops customer service training programs, said in an email to The Courant.
The decision by the large national banks to impose the checking account fee — while rekindling the long-running controversy over new and increasing fees — does not come as much of a surprise to some banking experts.
The challenge for banks is to “find a way to make [customers] more profitable without alienating them.”
Banks may be less willing to back down on checking fees, unlike when BofA scrapped the debit card fee. The argument with the debit card was that consumers were paying just to get their money. With checking, the bank can argue that it is processing checks and other transactions for the customer, Porter said.
The trick, Porter said, is persuading the customer that there is enough value being provided to justify the fee.
That value might be in the sprawling branch and ATM networks maintained by the big banks, although they existed before without the fee.