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Consumers are more likely to open checking accounts at banks that offer debit rewards and that reimburse surcharges other banks charge for ATM withdrawals, the results of a recent survey suggest.
Forty percent of respondents want debit cards that provide rewards when they use the cards for purchases, and 60% of consumers want their bank to reimburse surcharge fees when they use competitors' ATMs, according to the report "Checking Accounts: Who is Winning the Battle Online?" from Aite Group LLC. The Boston-based consulting firm analyzed the choices of 19,000 individuals who visited the financial-comparison Web site findabetterbank.com between February and June of this year.
"Consumers researching financial products online is old news at this point," wrote Ron Shevlin, the report's author and Aite senior analyst. But the fact the Web site attracted so many visitors with little to no advertising or marketing is a "testament to consumers' desire to compare financial products and make smart decisions about their financial lives," Shevlin wrote.
Shevlin segregated the site's visitors into three categories, he tells ATM&Debit News. Some were motivated by the monetary aspects of a checking account, including debit card rewards, ATM-fee rebates, interest on balances, unlimited check writing, and free or discounted check printing. Other visitors favored technology features. The third set could not decide on a particular checking-account preference.
Despite the increasing use of debit cards, only 9% of visitors chose rewards as a must-have feature. Rewards availability increased significantly in the last year, according to the 2008 Pulse Debit Issuer Study. Just more than half (51%) of the 62 financial institutions surveyed offered debit rewards in 2007, up from 37% that did in 2006.
The majority of debit card rewards the top 50 banks offer apply only to signature-debit transactions, according to a recent report by the Mercator Advisory Group.
Banks that reimburse customers who withdraw cash from a competitor's ATM do not have clear-cut policies on this issue, says Greg McBride, senior analyst with Bankrate.com, a consumer Web site based in North Palm Beach, Fla.
"Some banks require customers to keep a high balance in certain checking accounts in order to qualify for ATM-surcharge reimbursement," McBride says. "Other banks do require customers to keep a high balance."
Some banks also cap the number of surchages they will reimburse during a month, he says. Other banks have a more-open policy. Visitors to findabetterbank.com favored such technology features as online bill pay, mobile banking, e-mail account alerts and downloads for personal-finance software. Online bill pay is an account feature most-frequently cited as a must-have, closely followed by interest on account balances.
The difference between the three groups is not just what they consider to be must-have features, but how many features they consider to be must-have, Shevlin wrote. Of those visitors categorized as "ambivalent," 48% did not select a single feature as a must-have.
It is difficult to tell if site visitors are representative of consumers generally who are in the market for a checking account, Shevlin says. For example, about 50% of consumers said they overdrew their account at least once in the 12 months before visiting the site. Shevlin checked the percentage with banking industry executives and found the typical average percentage is between 10% to 20%.
"If it is representative, people are getting hit with overdraft fees and are saying 'I need to go find a better bank,'" Shevlin says.
Reputation also may play a part in the selection process, Shevlin says. Cherry Hill, N.J.-based Commerce Bank had the highest rate of users of the Web site that opened an account. Of the 655 times Commerce Bank was displayed on a search, users selected it 183 times.
"I wouldn't be surprised if people are coming to the site, seeing Commerce Bank listed and knowing their good reputation, and selecting them in a disproportionate percentage of the searches," Shevlin says.
Users selected accounts from large banks (1,000 or more branches) more than half the time they were displayed. Among banks with between 250 and 999 branches and Internet-only banks such as ING Group, users opted to open an account 33% of the time those institutions were displayed.
