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Are Banks Conning Customers?
By Erica Falkner
October 23, 2007
Why “quick and easy” shouldn’t always apply
According to a recent survey by the Gartner consulting firm, 42 million U.S. adults have been charged overdraft fees in the last 12 months, and ATM surcharges are at an all-time high with many banks charging upwards of $3 per transaction.
Turns out fees and overdraft charges are big money for banks, generating $37.8 billion in revenue last year alone. In fact, banks now make more money from fees than from credit cards, mortgages or any other interest-generating vehicles. Reports of these numbers outrage customers, who claim that banks are evil, deceptive and only out to make money; comments which leave me nodding in agreement—and scratching my head. Of course banks are trying to make money. They are businesses.
I hate ATM fees as much as the next customer, especially since I moved from Minneapolis, where U.S. Bank is headquartered and branches are plentiful, to Chicago, which has a whopping three branches in the entire city. I also don’t agree with many banks’ check depositing procedures. While banks can withdraw funds from a customer’s account almost immediately, it may take up to five days after a deposit to credit a customer’s account. This time lag is a major reason for many overdraft fees.
Do banks intentionally deceive customers into paying these fees? Maybe I’m being too charitable, but I think the main problem is that banks use poor marketing practices. Banks and other financial institutions are getting caught up in today’s “quick and easy” marketing ploys. While I’m all for making things quicker and easier, I don’t believe these practices can, or should, be applied to every industry. Unfortunately, when you make something easy, important details tend to get left out.
Personal finance requires a lot more thought and detailed information than buying, say, a candy bar. When it comes to my finances, I would much rather someone take the time to sit down with me and explain exactly what I’m signing up for—and please be honest. Customers often sign up for no-money-down or no-interest deals, only to learn later, and often the hard way, that these benefits apply only for the first six months or that there’s a minimum balance requirement.
Of course, I’m not saying banks are solely at fault. Customers must take time to become educated, but there are several things banks can do to help educate and empower customers. Banks can hold educational seminars where customers can obtain comprehensive information about checking accounts, credit cards and home and college loans. They can also produce more informational and fact-driven literature that is less about marketing and more about actually educating customers.
When choosing a bank, I would definitely select quality of service and educational resources over a catchy slogan or flashy brochure. Give it to me straight; and please, no more microscopic-fine-print brochures explaining why I’m now paying an annual fee for my supposedly free account.
Erica Falkner is a Marketing Manager at Vox, Inc., a customer experience research and consulting firm. Contact her through the feedback form on our Contact Us page. Copyright 2007 Vox, Inc. All rights reserved.
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