The CEO Really Said That?
Sometimes people say things that initially shock you. Then, after thinking about it for a while, you begin to wonder what motivated them to make the statement. Was there some ulterior motive? Or was it simply something said “off the cuff” that he or she later regretted making? Or, God forbid, did he or she actually mean it?
Such is the case with the comment made on Thursday, July 21, by the CEO of BB&T Corp during a second-quarter earnings call. Speaking about debit cards, the CEO commented, “U.S. banks should begin imposing annual fees for customers who use their debit cards. If a customer wants to use their debit cards to make a purchase, there should be an annual fee – found with many credit cards – of roughly $25.”
Another way to stick it to the poor checking account customer who’s been identified as the fall guy for all the problems banks have brought down on themselves over the past several years. For some strange reason, many bankers believe that the millions of free checking customers have been getting a free ride all these years and must now be punished with lots of new and higher fees.
And bankers wonder why so many customers distrust and dislike banks.
Perhaps the CEO didn’t realize his brazen comment would be picked up by the media and reported by Simon Zhen in his Monday, July 25 article, “BT&T Supports Charging Debit Card Fees,” appearing on the MyBankTracker website.
My first thought upon encountering this comment was “who appointed this guy to speak for the nation’s nearly 10,000 banks? What should they care what he thinks?
And then I thought that perhaps by sharing this thought he was actually “talking his book” as they say in the investment business. Maybe his banks are planning on adding a debit card fee and he would prefer if a majority of his competitors did so as well.
There’s nothing worse than being the first, and, perhaps, only, bank in the market to drop free checking or add an onerous debit card fee. Do this today and you can count on losing a significant number of once-satisfied customers. If you don’t believe it, a large Midwest bank dropped its free checking account over a year ago and saw account openings fall by half while checking attrition jumped 50%. It was an extremely painful, eye-opening, experience for this bank. And it should serve as a valuable lesson to other banks considering such changes.
Brand loyalty for banking is quickly becoming a thing of the past. And customers will become even less brand loyal if banks keep changing accounts while looking for every possible way to add more fees.
Imagine what might happen when you notify debit card customers that their once-free debit card will soon cost them $25 a year or as much as $7 a month.
The CEO’s comment about annual fees being “found with many credit cards” is largely irrelevant. About the only thing a debit card and credit card have in common is the word “card.” Sure, both are access devices but the debit card is tied to a customer’s most important account – an account he or she uses several times daily whereas the credit card is tied to an account that isn’t really necessary for many consumers and is used much less frequently by most of them. One is a “must-have” account while the other is a “nice-to-have” account. I’m sure most consumers will feel betrayed if their bank or credit union begins charging a monthly or annual fee for a “must-have” access device.
Can charging for writing a paper check be far behind?
After all, consumers were originally persuaded to use debit cards to reduce the costs of writing and processing checks and carrying lots of cash at all times.
A few consumers might start comparing banks to drug dealers – provide some free product and down the road start charging when your customers can’t live without your checking account, paper statements, overdraft service, or debit card.
Fortunately for the CEO, SunTrust has already announced it will soon begin charging a $5 debit card fee for every month during which the card is used for signature and PIN-based transactions at the point-of-sale. And Chase is testing a $3 monthly debit card fee in northern Wisconsin. I’m sure he’s hoping this new fee catches on quickly – providing cover for a forthcoming BT&T debit card fee.
Such a scenario enables BT&T employees to respond to customer complaints with comments like this: “Hey, stop complaining. The other banks are also charging this fee.”
Beginning this month, Bank of America customers requesting a replacement ATM or debit card will be charged a $5 fee with the only exceptions being expired cards and cards reported stolen. Chase already charges for replacement debit cards. But, these fees can be justified as they are the result of carelessness on the part of the consumer.
On the other hand, simply adding a monthly or annual fee for a debit card is nothing short of punitive. Such a fee will likely invoke the law of unintended consequences. You can read more about debit card fees and this law in last Thursday’s blog here.
In the meantime, if you still believe customers come first, ignore the recommendation of the CEO.