Finally, Free Checking Articles Go Positive
I have wonderful news for community banks and credit unions.
If the past couple of weeks are any indication, perhaps we’ve finally turned the corner on free checking articles.
What corner is that, you may be asking.
It’s the corner where you exit free checking is dead street and enter free checking is here to stay avenue.
The latest article mentioning the survival of free checking was posted to the Huffington Post website last Friday. “Over 4 Million Move Their Accounts From Wall Street Banks in 2010,” written by Sara Ackerman, is based on a March 1, 2011 press release from Moebs Services. While the headline and the gist of the article is about the mass exodus of checking customers from the big banks to the smaller community banks and credit unions, the overriding reason cited for this movement is consumers’ desire to avoid checking account fees. By the way, free checking was mentioned eight times in the article. You can read it here.
“Free Checking and Debit Incentives Post-Durbin,” by Bob Giltner, arrived in my inbox the day before. Appearing on the BAI website, it is the subhead that got me excited: “Free checking and debit card incentives are here to stay regardless of what happens with the Durbin Amendment because both continue to make sense for banks.” You can read it here.
An earlier article dated March 1, “Yes, Free Checking Does Have a Future, Mainly at Small Banks,” written by Rob Garver, appears on the American Banker website available here. You must be a subscriber to access the entire article online.
After discussing free checking with several bankers and bank consultants, Garver accepts the reality that free checking isn’t going away when he writes, “At least some analysts see a future for free checking as a means by which small institutions, credit unions and growth-hungry midsize banks can continue to differentiate themselves from their larger competitors.”
In 1982, Free checking was introduced as a way to differentiate a bank from its competitors and it appears it may revert to that original role. This is great news for those bankers wise enough to stick with America’s hands-down favorite checking account – Free Checking!
A fourth article, “Credit Unions: free checking champions,” by Claes Bell is available on the Bankrate.com website here. In this positive article about the future of free checking, senior financial analyst at Bankrate.com, Greg McBride comments, “Free checking remains alive and well at credit unions.” The article is based on Bankrate’s 2011 Credit Union Checking Study which surveyed 50 credit unions.
A related article on the Bankrate.com site is titled: “Americans say they’d bolt bank over fees.” It, too, was written by Claes Bell and is available here.
Citing information from Bankrate’s monthly nationwide poll, the Financial Security Index, Bankrate’s Greg McBride cautioned bankers about adding more and higher fees to checking accounts. According to poll data, “Of those [checking customers] making between $50,000 and $75,000 annually, 73 percent would consider moving their account. For those earning more than $75,000, the figure rises to 75 percent. On the other hand, among those making $30,000 per year or less, only 60 percent would consider changing.”
It appears the folks in charge at the mega-banks are incorrect in thinking that repricing checking accounts will merely drive what they perceive to be the low income, unprofitable customers from their customer base.
This is good news for the community banks and credit unions that are wise enough to not only retain their free checking accounts but begin marketing them aggressively.
Finally, let’s not forget what I consider the most important bit of free checking news to surface yet. It’s the news that Pittsburgh-based PNC Bank decided to keep its free checking account as Joseph Guyaux, president of PNC, estimates that about 70% of its five million checking customers have free checking.
The original story on PNC keeping free checking appeared in The Wall Street Journal article by Robin Sidel, “Checking Will Stay Free, Says PNC Bank.” You can read the article on the Journal’s website. You can also read last week’s blog on the PNC news here.
So, it appears the real story isn’t that free checking is going away.
The real story is that the four largest banks in the country are dropping free checking while adding new fees, higher fees, and minimum balance requirements and in the process driving millions of their checking customers into the lobbies of the nation’s community banks and credit unions.
Hopefully, as this mass migration continues, additional media articles will be written about the many winners gaining checking account market share at the expense of the few losers that made the knee-jerk decision to dump the free checking account in the search for greater fee income.
Our goal is to stay on free checking is here to stay avenue.