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June 06, 2012

My Crazy Ex-Bank: What Some FIs Are Doing to Keep You from Leaving

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by Ron Daly 

We all know someone with a "crazy ex" story. Some people just don't handle breakups well and they end up taking it out on the other person. Hopefully, you've never run into a crazy ex yourself...but you might wind up with one if you try and move your money from a big bank to a credit union. 

The "big guys" are going out of their way to "maximize breakage", as Seth Godin says. Some of them are charging big fees for closing an account you've had less than six months. Some of them are making it expensive to do an EFT or a wire transfer. Most of them are making the process itself hard to understand. From the article above:

Consumers Union also found that the account disclosures and websites for all of the banks surveyed failed to provide consumers with clear account closing policies. In the fall of 2011, the consumer advocacy group said it sent 16 secret shoppers to the banks’ branches to ask how to close an account. Some shoppers received conflicting information on how to do so.

I'll bet they did. 

Are the big banks really crazy? No. They know that if a process is difficult enough, you'll give up trying. If you can't close an account easily online, you'll go to the branch. If the process keeps you at the branch longer than a few minutes, you'll get antsy and leave. Either you'll break down and quit or you'll pay the fee to leave - if you feel strongly enough about the latter, you'll pay not to do the former. 

 Held Hostage by the Bank

I bet you're getting ready to shrug your shoulders and say, "well, what can ya do?" Believe me,this is a serious problem. Credit unions hungry from younger members and more "high quality" members should be cursing these complications. People with a lot of money in one financial institution will be hard-pressed to switch and "sticky products" like bill pay and direct deposit will make them even less likely to think about it. "Stealing" customers from the big banks is tough, not because you aren't good at what you do, but because people think it will be "too hard". And because that's subjective, they're always going to be right (at least, in their own right). 

I was in a room full of CU folks just a few weeks ago and we were talking about the trouble with switch kits. Someone asked, "Do switch kits work?" A resounding "NO" bounced around the room. 

One brave soul - a credit union employee, let's remember - said she had been with the credit union for a while and still hadn't switched over from Wells Fargo. "I guess it's just too hard," she said. 

"What if someone did all the work for you?" someone else asked. 

"Oh, then totally, I'd switch today," the first person said, enthusiastically. 

Could it work? A money-switching expert? Concierge service for moving things around? What if you waived all the fees to move the money? How much hand holding is it going to take to convince people it's not that complicated? 

If the CFPB gets wind of these practices, it's likely to come down on all of us. Wonder how the big banks will make it difficult to switch then. 

What are your thoughts? Have switch kits worked for you? What steps do you take to make switching pain free on new members? Your comments are always appreciated. 

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