If you were a bit -- or extremely -- peeved at some point over the past few months when you found out your bank was tacking on another fee to your checking account, debit card, or whatever, chances are you became even more ticked when you found out how difficult it would be to take your business elsewhere.
The reality is most people won’t leave their big bank; it’s just too convenient to stay. Data from Javelin Strategy & Research shows that consumers avoid switching banks because it’s a pain to actually walk into the bank to complete all of the paperwork, switch their direct-deposit, and maybe give up some or all of the online banking conveniences they’re used to. Internet bill pay is a big one. In fact, 44 million households paid a bill online in the past 30 days, up from 32 million five years ago, according to data from Javelin. And that figure is estimated to reach 55 million by 2016.
So you could say the banks have a lot of us right where they want us. What started out as a convenience for customers has now become a way to rope them in. Banks made it easy for you to do everything online, and now that convenience has made canceling your account an extremely irritating process.
What banks have essentially done is put a price tag on convenience. For Bank of America customers who don’t have a B of A mortgage or an account balance of $20,000 or more, the choice now is either pay the $60 annual debit card fee or go through the process of switching everything associated with your online banking account to another institution, which also may impose fees. Wells Fargo, Chase and Citibank, among others, also have added new fees for certain accounts.
Despite all this, Javelin found that fewer and fewer customers are switching banks -- an estimated 7% will move their primary account to a different institution in 2011, down from 12% last year.
Finding ways to keep customers has become a key strategy for any financial institution. Acquiring new customers can be five to ten times more expensive than retaining current ones, according a study by Aspen Marketing Services. Offering online bill pay became an effective way for banks to increase profitability and customer loyalty, as customers discovered the ease of doing everything with the click of a mouse. And that was no coincidence for the banks. Once you’re completely connected to one online account, you can imagine the difficulty of getting away.
So your dilemma has become: How much are YOU willing to pay for convenience? Are you annoyed enough to go through the lengthy process of ditching your big bank, or will you just bite the bullet and pay the fee? If you want to make the effort, local community banks and credit unions are often a better deal for your wallet when it comes to extra fees, loan rates and other services. In fact, 76% of credit unions still offer checking accounts with no monthly fees and the average charge to use an out-of-network ATM is only 99 cents, compared to the average $1.41 banks charge, according to a survey by Bankrate.com.
So do a little research before you settle for convenience. Check out ncua.gov to see if you’re eligible to join a credit union and also check out a few local banks before you let that big bank get the best of you (and your money).