As some of the nation’s biggest banks cut free checking, local banks and credits unions are licking their chops and rolling out promotions to snag new customers.
Just days after Bank of America announced it would begin charging $5 monthly fees for debit card purchases, a handful of Richmond-based financial institutions are looking to lure those disgruntled bank customers.
“It has been generating a lot of buzz around here, because we are definitely trying to capitalize on it,” said George Kite, CFO of locally based Call Federal Credit.
The $350 million credit union is getting ready to roll out a large free checking campaign.
Essex Bank has its own new campaign locked and loaded, according to Rex Smith, CEO of the Glen Allen-based bank.
“We discussed this potential fee issue several months ago, when the rumblings started, so we were prepared,” said Smith.
Smith said his bank is launching a rewards checking program this week.
“We think this will bode well and hopefully get us a lot of new checking accounts,” he said.
Big banks are adding the fees in reaction to recently enacted regulations that put a cap on the fee banks can charge merchants for running debit card transactions. SunTrust already started charging $5 on checking accounts. Chase and Wells Fargo are testing $3 fees in some markets.
For huge banks like Bank of America, putting a cap on fees for millions of transactions is a huge hit to the bottom line. The new $5 fee is a way to make up that revenue. But that could backfire, Smith said.
Big banks “are trying to pass the costs along to the basic consumer,” Smith said. “I think that is a mistake.”
Smaller banks and credit unions, at least for now, have the luxury of keeping checking accounts free thanks to a threshold that was built into the regulation. Financial institutions with less than $10 billion in assets (that encompasses all locally based banks and credit unions) are not subject to the cap.
Although free checking can be costly for smaller institutions, a checking customer could become an institution’s next loan recipient, and that’s where the real money is made.
“Anyone not subject to the cap is looking at this like it’s a great opportunity to steal customers,” Kite said.
Whether customers are mad enough to jump ship to smaller institutions remains to be seen.
“We have had an early indication that some customers are not going to stick with a bank that is charging them,” said Tom Winfree, CEO of Midlothian-based Village Bank.
But Winfree said it’s too soon to tell how many customers might make the leap.
“I cannot say there is a flood at this time,” Winfree said.
Union First Market Bank, the largest community bank based in Richmond, launched a free checking campaign in August and has another one planned, according to spokesman Bill Cimino.
“We saw a lot of consumer interest when we started the free checking campaign,” Cimino said. “That was right when people were starting to hear about the changes that were coming. We think people are interested in making a switch.”
Michael Schwartz covers banking for BizSense Please send news tips to [email protected].
As some of the nation’s biggest banks cut free checking, local banks and credits unions are licking their chops and rolling out promotions to snag new customers.
Just days after Bank of America announced it would begin charging $5 monthly fees for debit card purchases, a handful of Richmond-based financial institutions are looking to lure those disgruntled bank customers.
“It has been generating a lot of buzz around here, because we are definitely trying to capitalize on it,” said George Kite, CFO of locally based Call Federal Credit.
The $350 million credit union is getting ready to roll out a large free checking campaign.
Essex Bank has its own new campaign locked and loaded, according to Rex Smith, CEO of the Glen Allen-based bank.
“We discussed this potential fee issue several months ago, when the rumblings started, so we were prepared,” said Smith.
Smith said his bank is launching a rewards checking program this week.
“We think this will bode well and hopefully get us a lot of new checking accounts,” he said.
Big banks are adding the fees in reaction to recently enacted regulations that put a cap on the fee banks can charge merchants for running debit card transactions. SunTrust already started charging $5 on checking accounts. Chase and Wells Fargo are testing $3 fees in some markets.
For huge banks like Bank of America, putting a cap on fees for millions of transactions is a huge hit to the bottom line. The new $5 fee is a way to make up that revenue. But that could backfire, Smith said.
Big banks “are trying to pass the costs along to the basic consumer,” Smith said. “I think that is a mistake.”
Smaller banks and credit unions, at least for now, have the luxury of keeping checking accounts free thanks to a threshold that was built into the regulation. Financial institutions with less than $10 billion in assets (that encompasses all locally based banks and credit unions) are not subject to the cap.
Although free checking can be costly for smaller institutions, a checking customer could become an institution’s next loan recipient, and that’s where the real money is made.
“Anyone not subject to the cap is looking at this like it’s a great opportunity to steal customers,” Kite said.
Whether customers are mad enough to jump ship to smaller institutions remains to be seen.
“We have had an early indication that some customers are not going to stick with a bank that is charging them,” said Tom Winfree, CEO of Midlothian-based Village Bank.
But Winfree said it’s too soon to tell how many customers might make the leap.
“I cannot say there is a flood at this time,” Winfree said.
Union First Market Bank, the largest community bank based in Richmond, launched a free checking campaign in August and has another one planned, according to spokesman Bill Cimino.
“We saw a lot of consumer interest when we started the free checking campaign,” Cimino said. “That was right when people were starting to hear about the changes that were coming. We think people are interested in making a switch.”
Michael Schwartz covers banking for BizSense Please send news tips to [email protected].