Changing banks can be a daunting task, but statistics show that consumers are changing at increasing rates. According to a recent survey by J.D. Power and Associates, the rate of customers leaving one bank for another increased from 7.7 percent in 2010 to 8.9 percent in 2011. With new customers entering the market, banks are working hard to attract new clients with increased advertising, promotions and improved customer service.
In this competitive market, banks are trying hard to differentiate themselves from the pack. And customers are taking a more careful approach when selecting a new bank or choosing to stay with their current bank, according to J.D. Power and Associates. “These customers appear to be more discriminating and diligent when selecting a new bank,” said Rick Crowell, vice president of the financial service practices at the consumer ranking company.
What entices a customer to select a bank and when is it beneficial to leave one financial institution for another?
What Compels Consumers To Switch
Lifestyle Changes: According to the J.D. Power survey, the number one reason customers switch banks is a change in life circumstances. This often involves a change of location. When customers move, they're often willing to find a new institution if their current bank doesn't have a strong presence in their new location. Additionally, the purchase of a new vehicle or home loan may draw a customer from one bank to another in hopes of keeping his or her accounts within one institution. Other lifestyle changes like divorce, marriage and college graduation also impact a person's decision to change banks.
Customer Service: As with any business, customer service is vital. Being treated poorly, whether in person, online or on the phone results in negative customer experiences. In addition, if a consumer feels their concerns are not addressed, they may choose to look elsewhere for their banking needs. Many smaller financial organizations, like local banks or credit unions, pride themselves on the personal attention they are able to devote to their customers.
Rates And Services: For some, it’s just a matter of dollars and cents. Better interest rates, free checking services or other benefits not offered by the current bank can incite a customer to switch. Some customers may be looking for a more efficient mobile banking application, an automatic bill-pay service or special services for small business customers.
Fees: Many consumers have recently been inundated by bank fees and simply want a bank that offers fewer or lower usage fees. According to a report from the Research Intelligence Group and reported by Bloomberg, nearly 30 percent of consumers say they would switch institutions if their bank levied debit card fees. This has been tested recently as many banks are currently seeking to raise revenue with increased fees for ATMs, wire transfers and basic banking services.
Promotions And Advertising: It’s no surprise that banks compete to get customers in the door. By offering incentives such as gift cards, cash and other gifts, consumers may get the push they need to take their business to a new bank. Many institutions also promote limited time interest rates that are better than the average rates.
Promotions have an impact, according to J.D. Power and Associates. The study credits promotional incentives, particularly gift cards, for drawing people to other institutions. Those who stayed with their primary bank cite positive customer service and experiences as reasons for remaining loyal.
Location, Location, Location: For some, access to an ATM and local branches is a deciding factor to remain with a given institution. Customers are looking for convenience. If the local branches and ATMs are not easily accessible, they will find a bank with more convenient locations. This is especially true if the customer’s bank levies usage fees for using another bank’s ATMs.
Should You Switch?
Those are the most common reasons that customers give for switching banks. Now you can evaluate whether you should switch your bank.
Do you want a bank with fewer fees? How important is strong customer service and good access to local branches? Do you do all your banking online and care only about higher interest on your savings account?
Banking decisions should not be taken lightly. It’s important for customers to know their options. Researching institutions, their fees and their available services makes staying with or changing banks a little less taxing. Be certain to understand the terms and conditions and ask around to see what feedback friends and colleagues have about their banks.
Know what’s important to you as an individual. If you utilize online banking or mobile banking, be sure your bank measures up with its offerings. If you own a small business, look for the best business banking rates. If you want to invest, be sure to understand the terms and rates offered and compare them with your current rates.
Being an informed consumer will help you make the right decision.