Bank Fee Backlash Cost Big Financial Institutions More Than 2 Million Customers
That's how they advertise themselves, after all -- as the steady friends who hold our money, gently push us towards our dreams, and even pay us a little bit of interest for hanging around. Looked at from this perspective, leaving a bank isn't a spur-of-the-moment decision like switching from Pepsi to Coke or McDonald's to Wendy's: It's more like breaking up with your friendly-but-slightly-abusive girlfriend.
The emotional roller coaster aside, thousands of people switch banks every day, for a host of reasons: better interest rates, easier access to their money, or because they're leaving one town and moving to another. Last fall, however, an estimated 610,000 people dumped their significant bankers for a very specific reason -- to protest steep bank fees.
According to a recent study by Javelin Strategy and Research, 11% of the 5.6 million people who switched banks over the last three months did so as part of "Bank Transfer Day," an event inspired by Bank of America's (BAC) decision to begin charging its customers $5 per month to use their debit cards for purchases. BofA ended up scrapping the plan, but it, and many other banks, added a variety of other fees. In fact, as a 2011 Pew study showed, the average bank account has 49 fees, many of which -- like the confusing "'Staff Assisted Requests for Any Item or Statement Copy' fee, the 'Foreign Check Clearing Services for up to US $5,000 Drawn from Canadian Banks' fee, the 'Online External Transfer to Your Accounts at Other Financial Institutions' fee and the 'Large Amount of Coins Deposited' fee" -- charge for services that used to be free.
(Full disclosure: The author recently discovered a new $25 monthly fee that his bank is now charging him because his balance is below $15,000. This fee was added late in 2011, and was not part of the original banking agreement. The author is currently trying to get his money back, is exploring other banking options, and is attempting to remain unbiased in his discussion of the
But while the number of customers who were able to move their money on Bank Transfer Day itself was relatively small, many others have joined them over the following months. As Javelin reports, a further 26% of people who switched banks during the last 90 days -- about 1,456,000 customers -- also cited new bank fees as the reason for their moves.
This pattern of a slow diaspora from big banks dovetails with the demographic data that Javelin collected. Judging by the videos of Bank Transfer Day skirmishes, one might assume that the bank exodus of 2011 was largely composed of wild-eyed radicals -- or, as one Javelin researcher reported, "young, low-income hipsters." Not so: According to Javelin, people who switched banks "trended toward higher incomes." As these higher-wealth, generally older consumers continue to consider their banking options, it seems likely that America's largest banks are going to continue hemorrhaging customers.
Bruce Watson is a senior features writer for DailyFinance. You can reach him by e-mail at firstname.lastname@example.org, or follow him on Twitter at @bruce1971.