Banks Look to Draw Customers With Rewards


By Eileen A.J. Connelly, Personal Finance Writer

NEW YORK (AP) — Many consumers feel like they got the short end of the stick from their banks despite following all the rules. Soon they may be able to leverage their good behavior into some advantages.

Bankers are using buzzwords like "rebuilding trust" and "improving customer relationships" as they revamp products and try to regain their footing in the fledging recovery. But behind those soft words are some hard realities: the battered industry needs to find ways to grow without relying on acquisitions, hidden fees or risky products like subprime mortgages.

That gives some power to customers with strong credit histories and healthy balances. After a few years of feeling like they were punished for the sins of their irresponsible neighbors, these customers should find it possible to get some preferential treatment in exchange for their business.

That could mean talking banks into lower interest rates on credit cards or loans; or waiving fees for checking accounts, using online banking or out-of-network ATMs. Having multiple accounts with the same bank will increase bargaining power, because banks want to nurture those customers to do more even more business.

"Their goal is to get as many different relationships with you as possible," said John Ulzheimer, consumer education president for In exchange for a move such as transferring an Individual Retirement Account or taking out a new loan, you should be able to get some perks. "Horse-trading is something that bank customers should feel comfortable doing."

It's not just the economic meltdown that put banks in this spot. "The financial crisis provides dramatic backdrop. But that's not the fundamental force at work," said Robert B. Hedges Jr., managing partner of financial services consulting firm Mercatus LLC.

Two broader factors have banks more focused on delivering for their customers, Hedges said. The first is the Internet, which makes it easy to search for more attractive deals and to move money between far-flung accounts. The second is that after a two-decade-long wave of consolidation, major banks can no longer count on growth through acquisition.

Regulation is also playing a role. The credit card law that took effect in February makes it harder to generate outsized profits by raising interest rates and charging multiple fees. New rules governing overdraft charges and the order in which checks are processed will also reduce income when they take effect in July.

That means banks have to increasingly depend on bringing in new customers, and new business from existing customers, to increase profits.

And then there's the anger still bubbling over the economic meltdown. "It's not lost on anyone that the industry in general has taken a few blows over the last couple of years," said Doug Johnson of the American Bankers Association. The challenge for bankers is to differentiate the perception customers have about banks overall and the their own institutions.

All consumers will be able to take advantage of some ways banks are responding. For instance, banks large and small are rushing to offer mobile applications that enable customers to manage their accounts on the go.

Some banks are also simplifying account documents and revamping policies for penalty fees and deposit processing.

Bank of America, for example, has sent its mortgage and credit card customers one-page summaries on rates, fees and payments written in simple language rather than pages of fine print. It also made headlines last month by eliminating overdraft fees on its debit cards.

The moves are in response to feedback that showed customers want clearer terms and more control, said Susan Faulkner, senior vice president of consumer banking. "We needed to listen to our customers about how their needs have changed during this recession."

Bank of America has also been in contact with consumer advocacy groups as part of its campaign to appear more customer friendly.

Trust in a bank is a squishy concept, said Ron Shevlin, who covers retail banking issues for Aite Group, a financial services industry consultant. "Different people have different notions of what's most important to their definition of trust," he said. For some, interactions with tellers or customer service staff matter most, while others are more concerned about whether they get good advice on handling their money. A third group simply wants the best rates, lowest fees and best deals. And for all customers, transaction mistakes or other problems would trump warm-and-fuzzy appeals.

An institution trying to rebuild trust must recognize that any action like changing a fee policy may at best increase trust with just a segment of their customers, Shevlin said. And no one should depend on marketing to do the job of wooing customers. "Their perceptions are driven more by their experiences, not by their perceptions of the advertising."

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