STAMFORD, Conn. — A recent survey from research firm Gartner, Inc., suggests that credit unions should continue to make the case that they have generally lower fee structures than do banks.
The online survey of 5,000 U.S. adults in 2007 found that found that 20% of consumers switch financial institutions over fees while only 4% do so out of concern their institution is not protecting their confidential data. This runs
sharply counter to marketing pushes by major banks which highlight security efforts and would seem to offer CUs a further opportunity to highlight the fee difference with banks.
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"Consumers switch banks more because of excessive fees than because of security," said Avivah Litan, vice president and noted analyst at Gartner. "Banks spend considerable marketing dollars touting security features as a reason to do business with their institutions, but if their
primary goals are customer acquisition and retention, they should simply lower or eliminate overdraft fees. Banks would be better off marketing low fee structures rather than security features if their business plans can indeed support such a strategy."
Overdraft fees were what really got the attention of Gartner's respondents. About 25% of the respondents were charged an overdraft fee by their bank in the last year, they said, and 63% believed the fee was unfair, mostly because it was too large, Litan explained.
"Consumers report overdraft fees of $30 to $40 for an overdraft in the pennies or single dollars range," Ms. Litan said. "Consumers also complain that banks take too long to process deposits, or fail to alert customers that accounts are in overdraft. Banks charge overdraft fees on debit card purchases they authorize, even if the account balances can't cover it, and even when funds arrive in the account before settlement."
Banks spend considerable marketing dollars telling consumers that their money is safe in their banks' accounts. The banks boast about zero-liability policies for using credit and debit cards and, in some cases, even for online banking. Perhaps customers take security for granted, but it's clear that customers would rather hear about lower bank fees. What banks don't say is that they don't mind if those fees chase away less-profitable customers.
Consumers earning less than $25,000 a year pay higher overdraft fees than consumers who earn $100,000 or more a year, the firm added.
The highest net worth "private banking" customers typically don't pay any fees at all, no matter how large a check they bounce, Gartner said. About 54% of low-income earners paid overdraft fees over $30, while just 40% of the high-income earners paid fees over $30. Meanwhile, Gartner estimates it costs banks less than 50 cents to electronically return a payment request because of insufficient funds.
Gartner says Litan will present a more detailed report on the survey's results at it's Identity and Access Management Summit in Los Angeles in November.
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