By AnnaMaria Andriotis
Reports that Bank of America could shut down some locations may frustrate some clients, experts say — but just don’t expect them to leave.
With most consumer services, from airfare to health care, the lowest price usually wins. Not so with banks, experts say. Excluding life-changing events like relocation or marriage, just 5% to 7% of a bank’s customer base moves each year, says Joe Gillen, CEO of Pinnacle Financial Strategies, a bank consulting firm. And despite rising fees at big banks, customers are still depositing more of their money there than at smaller financial institutions: Balances were growing three times faster at the 25 largest banks in mid-November than they were at smaller banks, according to Federal Reserve data.
And remember the so-called Bank Transfer Day, on Nov.5? That’s when consumer advocates encouraged bank clients to strike back at all the nickel and diming by big banks by transferring their accounts to credit unions. The result: Membership at credit unions grew by just a third of what was originally projected.
To be sure, there’s still a big reason to stick with the big banks, says Gillen: convenience. Large banks have the most branches, which makes banking near home, work or on vacation easier. And even if Bank of America does shut down some of its locations, experts say it’s a nonissue for many consumers who are accustomed to doing most of their banking online.
Experts say consumers are hesitating largely due to psychological reasons. “There’s a fear of change,” says Dan Geller, executive vice president at Market Rates Insight, which provides research and analysis to financial institutions. Consumers are concerned they might find the grass isn’t greener on the other side — that the same fees and problems they encounter at large banks could ultimately show up at the smaller ones, he says.
Secondly, there’s the perception that changing banks is difficult and too much hassle, says Gillen, especially if the consumer has linked his or her bank accounts to many other aspects of their life. For example, it may be where their paycheck is deposited, or some of their retirement savings. But in reality, most changes can be made within a day or so, he says. One exception: in cases where a wireless provider or an insurance company automatically withdraws money from a checking account, consumers might want to keep that money in there until they finalize the transition, he says.