Hungry for deposits and fees, banks today are so desperately seeking checking customers that they have reverted to the days when they offered toasters, Tupperware, and electric blankets as incentives to open accounts.
These enticements have been modernized to include premiums such as free house cleaning services, bags of groceries, grills, coolers, and plain old money. And they seem to be working. Boston-based First Trade Union Bank, for example, has opened 230 checking accounts this year by offering consumers a chance to earn $100 in cash bonuses.
“That’s the million-dollar question,” said Stephanie Rollins, a marketing officer at the bank. “What is the price tag to get people to switch?”
The humble checking account lost its luster as banks pushed gold-plated services such as wealth management and investment advice, but it recently regained a shine for several reasons, analysts said. Chief among them is the opportunity to collect more fees.With low interest rates and the costs of new regulations squeezing profits, financial companies are finding that revenues generated by fees are increasingly important to their bottom lines.
“We’ve gotten to a point that bankers are beating each other over the head to get the primary household checking account,” said Suzanne Moot, a Milton-based bank consultant. “There’s a lot of fee income associated with checking accounts, that’s why banks like them.”
Eastern Bank, the state’s largest community bank, offered new checking account customers in April and May four hours of house cleaning services valued at $165. At East Boston Savings Bank, consumers can get a charcoal barbecue grill or a beach chair. Santander Bank is giving customers who open checking and savings accounts $20 a month; checking accounts have increased 20 percent since the promotion was launched in October, said Amandio Sena, a senior vice president for Santander’s consumer banking division.
Belmont Savings Bank next week will begin its own giveaway with an element borrowed from a television game show: New customers will spin a wheel at the bank’s grocery store branches to get up to $150 off their shopping bill.
All this swag is aimed at the small slice of consumers ready and willing to switch financial institutions each year, about 15 percent of the market, said Hal Tovin, the executive vice president of Belmont Savings. Getting their attention amid the din of so many competitors means standard cash just doesn’t always cut it.
“This isn’t a growing market in the number of people; it’s a share game,” Tovin said. “The key for us is to be in front of people. You’re breaking through the clutter.”
Stow resident Adam Tocci, 48, had been looking to switch banks when he passed a sign promoting an earlier Belmont Savings Bank freebie, a rolling cooler with speakers. It made him ask for more information about the bank’s offerings, Tocci said.
“I asked myself, ‘What am I waiting for?’ ” said Tocci, who opened an account at Belmont Savings two months ago. “It influenced the timing of my decision.”
Banks haven’t always been so enamored with the checking account, which can be costly to maintain. The annual average cost of a checking account, from hiring tellers to operating ATMs to preventing fraud can be as much as $300 for each account, the American Bankers Association estimated in 2010. That led some banks to close accounts of people with low balances who didn’t do much other business with the bank.
Following the financial crisis, many banks aggressively pursued affluent consumers with specialized and expensive services, such as wealth advisers. These services have higher profit margins than basic bank services.
But checking accounts still generate a bulk of bank fees, including overdraft penalties and charges known as swipe fees from merchants. Since 2008, banks have raised the median overdraft fee from $25 to $30 last year, according to Moebs Services Inc., an Illinois-based financial research firm.
Overdraft revenues have fallen from their 2009 peak of $37.1 billion but have stabilized, hitting $31.9 billion last year, according to Moebs.
In addition, the checking account remains the entry point to banks for many customers, who might end up buying other products and services, said Greg McBride, a senior analyst with Bankrate.com, a consumer financial website.
“Checking accounts have long been, and continue to be, seen as the centerpiece of the banking relationship,” McBride said. “That’s exactly what the bank is after — a relationship.”
While the giveaways may be attractive, consumers should be aware of all the requirements attached to their checking accounts, including how fees are triggered, said Mike Moebs, the chief executive of Moebs Services. Many of the bank giveaways usually come with strings for consumers.
Santander, for example, requires customers to direct deposit their paychecks and pay bills online to qualify for the cash. To get the $100 bonus at First Trade Union, customers have to use its mobile app and set up direct deposit. Eastern Bank required consumers to enroll with a direct deposit for its maid service promotion.
Many of these requirements, such as direct deposit and bill payments, are designed to keep consumers at the bank long after the promotions end, since changing automated payments from your electric bill to your gym membership can be a hassle.
And if customers don’t meet all the account conditions, such as minimum balances, the banks have fees at the ready.