Some consumers switch banks, blame high fees
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Consumer Reports recently found that 20 percent of banking customers who use a checking account have considered switching financial institutions in the past year, which was largely due to the high fees attached to their account.
Of the one-fifth of customers who have thought about switching their account to a new financial institution, more than 40 percent said that fee increases for regular banking services made them pursue other choices, the report explained. In addition, more than 35 percent explained that there were other banking options that had more favorable rules than their current institution. More than one-quarter said their current financial institution did not have good customer service.
"Unfair bank practices and rising fees are prompting more and more consumers to consider voting with their feet and taking their money to another bank or credit union," said Suzanne Martindale, staff attorney for Consumers Union, the policy and advocacy arm of Consumer Reports. "But many consumers don't follow through because moving your money takes a lot of time and money and some bank policies make it harder than it should be. We need to make it easier for consumers to switch banks so they have a real choice when it comes to where to keep their money."
While many did switch financial institutions, a large group explained that they could not do it. The report noted that nearly two-thirds of banking customers were turned-off by how difficult it would be to switch automatic payments, deposits and other important options to an account at a new financial institution. Another 37 percent said that the whole process was just too arduous and time-consuming. Another 28 percent were unwilling to pay for transfer penalties for switching accounts.
The continued migration of customers may force some financial institutions to make some important banking decisions about the frequency and amount of fees attached to their checking accounts. However, by making their account options more attractive, many of these financial institutions could take in a large number of new customers. This could help improve business practices significantly, and put many financial institutions in a good position when compared to their competitors.
Some proponents are looking for legislation to regulate this. However, there are other options such as private market solutions to help consumers untangle from their prior institution.
What is your financial institution doing to help calm customers' fears over banking fees? How are you trying to attract customers disenfranchised by other financial institutions?