Banks now baiting you to switch

Psst…want a free iPod?  How about a George Foreman Grill?  These are not come-ons from some street vendor or late-night infomercial, but incentives being offered by the bank down the street. To grab and keep consumers’ attention, financial institutions know it takes more than a banner promoting free checking accounts these days.

“Incentive programs are a way to build customer loyalty,” explains Genie Driskill, COO and senior vice president of research with Synergistics Research Corp. in Atlanta, a firm that helps banks gauge consumer preferences.

Building loyalty is good, but with increasingly alluring promotions, it appears many banks are going above and beyond, trying to buy it outright. The competition for attention and loyalty is definitely to the consumer’s advantage these days. 

For instance, Citibank’s ThankYou program rewards customers based on the number of bank products they use and the frequency with which they use them.  Points — redeemable for everything from TVs to gift certificates — are awarded for every direct deposit, bill paid online, and transaction made with a linked debit or charge card.  The more business transacted through Citi, the more stuff a customer can accumulate.

At Guaranty Bank, with branches in Texas and California, it is air miles that accumulate through its AirMiles Checking account.  American Airlines Advantage miles accrue based on the account’s average daily balances—the higher the balances, the more miles a bank customer receives.

Bank of America’s Keep the Change program encourages frequent use of a checking account-linked debit card by rounding up every amount spent to the nearest dollar.  The difference is automatically deposited to a savings account, offering a painless option for saving more. Now, throw in three months of matching funds from the bank, and customers are literally paid to save their money.

Bypassing programs altogether, Chase is flat out paying for new accounts.  It is currently offering $50 to Chicagoans willing to switch their checking accounts.

Why the growing interest in the lowly checking account? Banks now recognize it as the marketing gateway to a household’s financial life and all the higher-end — and higher fee-producing — products like mortgages, retirement accounts and insurance policies.  Checking accounts are such valuable gateways that $50 upfront is a small entry price. An origination fee here, a late charge there and pretty soon that $50 will look like a smart investment given the years of fees and interest charges it can lead to. 

Certainly bank promotions are nothing new. But with consumers trained by the airline, credit card and retailing industries to expect some manner of kickback for every transaction, an occasional toaster or cuddly toy promotion will not cut it any more.

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