by Broderick Perkins
(3/9/2012) Erate Exclusive - Remember when we said "The movement by more than a quarter million Americans who dumped banks for credit unions after Bank of America announced a new debt card fee, is probably just the tip of the iceberg?"
That was back in November, 2011 around the time the "Bank Transfer Day" movement actually contributed to nearly three quarters of a million consumers dumping big banks for credit unions and smaller banks, forcing BofA to back off.
Well, we told you so.
It was just the tip of the iceberg, according to J.D. Power and Associates.
Consumer's remain fed up with bank fees, poor service and unmet expectations and continue to dump their bank for credit unions and smaller banks and the defections are coming in ever greater numbers.
According to J.D. Power:
• Acquisition of new customers by smaller banks and credit unions has increased by 2.2 percentage points to an average of 10.3 percent in 2012 from 8.1 percent in 2011.
• Among big banks, regional banks and midsize banks, switching rates average between 10.0 and 11.3 percent, while the defection rate for small banks and credit unions averages only 0.9 percent, a significant drop from 8.8 percent in 2011.
• The study, which examines the bank shopping and selection process, found that 9.6 percent of customers in 2012 indicated they switched their primary banking institution during the past year to a new provider. That was up from 8.7 percent in 2011 and 7.7 percent in 2010.
The study found that higher fees were the primary culprit prompting bank customers to shop for a new financial institution. One in three large and regional bank customers said fees triggered their shop-around reaction.
"When banks announce the implementation of new fees, public reaction can be quite volatile and result in customers voting with their feet," said Michael Beird, director of the banking services practice at J.D. Power and Associates.
Toss in poor customer service and customers are even more likely to defect.
"Service experiences that fall below customer expectations are a powerful influencer that primes customers for switching once a subsequent event gives them a final reason to defect. It is apparent that new or increased fees are the proverbial straws that break the camels back," said Beird.
Regardless of bank size, more than 50 percent of all customers who said fees were the main reason that encouraged them to shop around, also indicated they suffered poor service from their prior bank, J.D. Power reported.
Defecting bank customers are often lured to smaller operations by promotions and cash incentives, but good customer service is what keeps them happy.
Only 32 percent of customers who selected a new bank because of promotional offerings said they definitely would not switch banks again in the next 12 months. In comparison, 46 to 51 percent of customers who chose the new bank because of either good service experience or positive recommendations said they definitely will not leave within the next year.
Thinking of switching?
• Shop around. Compare terms and service, just as you should for virtually any major purchase. Don't overlook online banks. Their competitive click-and-order fees and rates may offset any inconvenience caused by their lack of brick-and-mortar operations.
• Don't be swayed by promotional lures alone. Choose a bank that doesn't gouge you for fees, but offers the products you need.
• Read the small print. Take time to review brochures and disclosures and asking questions about the services you are about to use. Fully understand how any fees are charged and how they can be avoided.