Issue Date: January 26, 2003
Today's low interest rates don't attract depositors. That's why we're seeing ...
The return of the friendly bank
I couldn't believe my eyes. "No ATM fees," read the sign at Signature Bank. My feet took me inside the branch at the corner of 39th and Madison in Manhattan, which (although still under construction) looked like no bank I'd ever seen. There were no tall counters shielding the tellers, no bulletproof glass with tiny windows to push the money through. Just open space, with a desk here and there. I found a manager. "I have a Chase ATM card," I said. "Are you telling me I can use this card at your bank and won't have to pay anything?" He nodded yes. So I pulled $20 out of checking just to see. And indeed, no $1.50 surcharge was assessed to my account.
The trend started in small banks. Now even the big boys are playing nice.
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What's going on here? Only a few years ago, banks competed for customers on the basis of the interest rates they offered on deposits. These days, however, savings rates are anemic (the average is 1.4%, according to Bankrate.com). So banks have had to pull out a different playbook. To win you as a customer, they're making an effort to be nice.
They're not doing it out of goodwill. When the economy was booming, banks had to pry money out of the hands of tech-stock-hungry consumers. Now that those same customers are hoarding cash, getting someone's checking business means bigger deposits and bigger profits. Says Advest banking analyst Anthony Polini, "It's becoming apparent that you have to get the primary checking account to get the whole consumer."
David S. Hickman, chairman of United Bank and Trust in Tecumseh, Mich., agrees. "We're not being nicey-nice. When we stay open until 7 p.m., it benefits us, too," he says. "After work, often both spouses come in together. [The success rate of closing mortgage deals] is much higher than if you see just the husband or wife."
As you might expect, these customer-friendly changes got their start in small banks like Hickman's that were forced to dig deeper to make up for not having an ATM on every corner. But the fact that they worked -- stealing market share from some of the big boys -- has forced the larger banks to play nice as well, says Fritz Elmendorf of the Consumer Bankers Association. This competition means you win -- and not just today, but for the long haul: Once consumers get used to perks like these, it will be difficult to take them away.
You won't find every perk at every bank, but picking the ones that matter most can ensure a better (or cheaper) banking experience. They include:
Free checking. Nearly 9% of the country's checking accounts are now fee-free, up from 7.5% last year, says the American Bankers Association. Sovereign, Washington Mutual and Fifth Third are among that group.
Free online bill payment. Bank of America is one of a growing number of banks that have eliminated the typical $4 to $7 monthly charge for online bill payment.
Extended hours. Woodforest National Bank, with more than 100 locations in Texas (many in Wal-Marts), has been experimenting with 24-hour branches, primarily near hospitals, restaurants and factories with shift workers. Other banks have longer weekend or weeknight hours for working folks.
Extra services. Commerce Bank in Delaware, New Jersey, New York and Pennsylvania has installed "Penny Arcade" machines to count your jars of change at no charge (eliminating the need for those dreadful Coinstar machines that charge 9 cents on the dollar). U.S. Bank/Firstar gives customers $5 if they have to wait in line for more than five minutes or if the ATM is down. And Hickman's United Bank and Trust in Michigan brews and serves its own brand of coffee.
More store-like atmosphere. Wells Fargo no longer has "branches"; it has "stores." Bank of America and Washington Mutual have tellers working the floor who can process transactions on the spot. And the American Bankers Association reports that more banks are selling merchandise -- from piggy banks to financial advice books -- in their lobbies.
Sounds good, right? It certainly sounds better. But how do you know whether it's worth switching? First, keep in mind that banking with a large institution is a very different experience from going with a small, local one. If you travel frequently and depend on your bank to have a presence statewide or even nationally, a big bank is probably the right choice, says analyst Moriah Campbell-Holt of Gomez.com, which rates online financial services. The same is true if you rely on your bank to be your broker or to play other important roles in your financial life. But if what matters to you is the personal touch, you may be happy with a small player.
Some paperwork is involved in making the switch, especially if you have direct deposits and debits to transfer, but it's not the headache many consumers expect. "All of those things don't take that much time," Campbell-Holt says.
Jean Sherman Chatzky is the author of "Talking Money" (Warner Books, $24.95). Additional reporting by Brian B. Reid.
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