LINCOLN, Neb. — A majority of consumers will move their checking account if their financial institution eliminates free checking.
A new national study by Acton Market Intelligence (AMI) of over 10,000 consumers indicates that 67% of checking accounts will not remain in-house if a bank or credit union eliminates free checking-or adds new requirements to keep checking free.
Gary Gabelhouse, senior analyst, told Credit Union Journal that if financial institutions begin "monkeying" with free checking, they will lose significant checking share.
"People want exactly what the word implies, truly free checking. That's as simple as it gets. They don't want what some may consider a relatively acceptable change, like raising minimum balance requirements or charging for paper transactions. Even though those things may seem somewhat benign, the data suggests consumers feel that is not what they signed up for."
Big banks have already begun eliminating free checking as the result of new laws related to interchange income and other issues, and Gabelhouse said AMI believes that if small community banks and CUs stay the course with free checking they will pick up significant market share when consumers move—a strategy supported already by another industry analyst (
The study, titled "Free Checking & The Banking Customer," further emphasized the importance of free checking in consumers choosing a primary financial institution, with 85% feeling that free checking is critically or very important to them in their selection of a PFI. The key question the study asked consumers: "If your bank or credit union started to charge fees for services associated with what was previously their free checking account, how would you respond?"
"By normalizing the data for multiple responses, 67% of the current checking customers in America would likely switch—36% almost immediately and 31% not until after they had researched their institutions and others with regard to their offering truly free checking," said Gabelhouse.
Nevertheless, faced with pressure on revenue streams, more credit unions may likely get rid of free checking or add requirements to keep the account free (
Be Careful With The Asterisks
Respondents were given a number of different fee strategies to consider, asked how likely they would be to switch institutions if their checking account took on alternative fee strategies. According to the study, the fee strategy least likely to cause account switching is free Internet and mobile banking—with a fee for paper transactions. Less than half (49%) of the checking consumers said they'd likely switch institutions if such a strategy was implemented. The fee strategy that is most likely to cause account switching is charging a fee for the number of debit card transactions at retail in a given month (60% will switch).
Gabelhouse cautioned CUs about making conditions a part of free checking. "This is the tricky part. According to the study data, there is no one thing you are safest doing. Response to different alterative strategies vary based on age, gender, and other demographics. So the credit union's customer base is really what dictates what a credit union can do with checking pricing. If they want to monkey around with free checking, their customer information and demographics are what they should be paying attention to."
Gabelhouse pointed out that 18-to-25-year-old males respond significantly differently than 65-plus females as to what change in free checking account structure would be least likely to cause them to switch. Gabelhouse noted that regardless of the fee strategy, females were consistently more likely to switch institutions than males. Individuals making over $100,000 were more likely to switch than consumers making between $30,000 to $99,000.
For info: www.actonfs.com; View: 'Killing Free Checking Will Kill CU Edge'; Stressing Checking Accounts; It Will Be All About The Pricing. AMI is providing a free "summary version" of the report. A full report is available for $99, which includes census region breakdowns, income levels, and more.
