DALLAS -- In the fight for the hearts and wallets of consumers, a Texas thrift thinks it may have found the best incentive: cold, hard cash.

Houston-based Bank United last month began marketing CashBonus Banking, which is believed to be the first program in the nation to offer to pay cash annually to retain customers.

Under the program, a customer must have a checking account and maintain a balance of at least $7,500 in combined deposit and loan balances. Individual retirement accounts and mortgages are not included.

Anyone falling below the minimum balance faces a $25 monthly fee. Those who maintain the balance are paid a 0.2% cash rebate annually on their combined balances. The program also offers no fees, two free non-Bank United ATM transactions a month, a consolidated monthly statement, and some other common perks.

Seen as Profit Generator

Ron Coben, senior vice president of marketing at the bank, estimates that a customer with an average balance of $45,000 in deposits and loans would earn $90 back. Executives declined to estimate how much the program might cost them. But they believe it will generate profits by boosting balances and save expenses by keeping customers.

The program takes a page from credit card marketers who reward loyalty with rebates, gifts, and cash-back bonuses. But experts said it is the first time cash offers have been used to build traditional retail banking.

"I've never seen anything like this," said Fritz Elmendorf, spokesman for the Virginia-based Consumer Bankers Association. "It's part of what's been going on in terms of creating incentives for multiple relationships."

Executives at the $8.3 billion-asset thrift say that since they began a five-month, $3 million advertising campaign in mid-May, the response has been strong. They said some customers are moving accounts from other institutions, boosting hopes that Bank United's cross-sell ratio will climb from just under two to an average of four.

The program is an effort to establish the company as a retail bank in already crowded Texas markets, executives say. Bank United is known for its mortgage and wholesale banking subsidiaries, but its branch system was assembled largely from failed thrifts.

"There's a lot of inertia that goes on in banking," said Barry Burkholder, who became president and chief executive officer at Bank United after a 15-year career in consumer banking at Citicorp. "For most customers, as long as the service is okay, or at least not terrible, they'll leave their money there. We all have to fight to get their attention."

CashBonus Banking is designed to boost the thrift's $4 billion in deposits by growing business at its 63 branches. Located in the state's major metropolitan areas, these branches must compete with out-of-state giants like Chemical's Texas Commerce Bank, NationsBank Corp. and Banc One Corp.

Unique Selling Proposition

Mr. Coben says the goal is to distinguish Bank United by giving customers more than cookie-cutter accounts.

"Our surveys found that these packaged products have fallen short in three areas," he said. "People have said don't treat me like a number, don't nickle-and-dime me with fees, and they believe good customers should get more."

"Banks have to decide if they want to pay upfront to keep the customer, or if they want to spend to get them back later," Mr. Coben said. "What this really says to the customer is that we want to build a relationship."

Mr. Burkholder agrees, noting that banks lose an average of about 10% of their customer base annually. He points out that the longer a bank has a customer, the more profitable the relationship becomes.

For now, Bank United is the only bank known to offer such a program. "I don't know who may emulate us," he said. "We'll have to respond at that time."

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