For a decade, the only time Tim Atkins changed banks was when the institution that had his money was sold.
He was a happy Wells Fargo customer for years. Before that, Wachovia. Before that, SouthTrust Bank.
But now, angered by the elimination of his debit card rewards program and a monthly debit card fee Wells Fargo is testing, Atkins has had enough. Two weeks ago, he joined Delta Community Credit Union. He is closing his Wells Fargo accounts.
“The debit card fee caused me to start looking at my options,” the 29-year-old trainer for a tutoring company said. “What kept me at Wells Fargo was convenience.”
Recent rules written by the Fed and called for by the Dodd-Frank financial reform act put a cap on what banks greater than $10 billion in assets can charge merchants to process debit purchases. Many big banks announced fees on consumers to make up for that lost revenue. The cap doesn’t apply for smaller institutions.
As more banks begin adding fees for debit card usage, frustration on the part of consumers grows. Bank of America recently announced a $5 monthly fee for basic account holders using debit cards for purchases; SunTrust has a similar fee for its Everyday Checking customers.
Credit unions and community banks, unaffected by the new law, are using the expected backlash to welcome new customers.
Fidelity Bank chairman Jim Miller said he has been advertising the Atlanta bank’s free checking program for more than two years. Had he known that consumers would get as upset as they seem to be about added fees, Miller said, he would have concentrated his ads to take advantage of the moment.
“It’s very difficult to get people to switch banks,” Miller said. “They have to get totally fed up with the bank they’re at.”
Even people who have reached the tipping point with their banks can have a hard time making a switch, once they realize the amount of effort that goes into changing multiple accounts, direct deposit and online bill-pay. Miller said Fidelity employees will make all the changes for new customers. Several credit unions have “switch kits” they use to walk new customers through the steps.
Terry McEvoy, a bank analyst for Oppenheimer & Co., said he expects to see more aggressive advertising from smaller banks that see a window of opportunity to make their case. One, in Florida, is advertising a product that pays customers $5 a month, he said.
But McEvoy said he doesn’t actually expect many customers to take the step from talking about switching to actually doing it.
“More and more customers are more entrenched in their banks,” he said. “To unwind it is time consuming.”
To get people to actually make a change, Mc-Evoy said, means doing so must be made as simple as possible. Atkins, who recently joined Delta Community Credit Union, said he expects it to take a month before he has finished switching his direct deposit and all the bills that were being paid from his Wells Fargo account.
It could be more than a year before the true fallout of the fees is seen, said Gerard Cassidy, managing director of bank equity research for RBC Capital Markets. But he said in the end, he expects big banks to lose far fewer than 10 percent of their customers in response to new fees. Those that do leave, Cassidy said, may turn out to be the ones that have fewer accounts with the bank, and are therefore less profitable.
Still, Cassidy said even a small number of big-bank defectors could be huge for local institutions.
“Crumbs for the large bank are large pieces of pie for the community bank,” he said. “I fully expect community banks to aggressively go out and advertise.”
LGE Community Credit Union had billboards and TV commercials out before many banks announced new fees, but spokeswoman Andrea Shorr said the credit union recently swapped out the ads it had — dealing with refinancing — for ones that tell consumers that its checking accounts are still free. In the past three weeks, online applications for membership have increased to a high of 70 a day, from a daily high of 25.
Shorr said the new applicants she has talked to have looked to the credit union because of fees at the institutions they bank at. At Delta Community Credit Union, executive vice president and chief operating officer Todd Marksberry said the monthly average of 1,500 applications through July jumped to 2,200 in August and 2,300 in September.
“Those folks are coming in, and they’re pretty upset,” Marksberry said of the newest members. “Debit card fees are the straw that broke the camel’s back.”
Miller, with Fidelity Bank, said he knows why big banks are adding fees, having lost some of the income they were receiving from retailers and, earlier in the year, overdraft income. But he’s still happy that those who are leaving big banks are choosing Fidelity.
Many new Delta members don’t have bank accounts that would incur fees, Marksberry said, or can afford to pay them if they do. For them, leaving a bank is a matter of principle.
In fact, Bankrate.com senior financial analyst Greg McBride said a March survey indicated 64 percent of Americans would consider switching institutions if checking account fees increased. Among more affluent people, the figure was even higher.
“Fees are a front-of-mind issue for consumers,” he said. “They’re more inclined to take action now than they would have been a couple years ago.”
Still, McBride said, it remains to be seen whether consumer intent will align with actual action.
Atkins, who removed his money from Wells Fargo, said the decision has been a good one for him.
“They have every right to make a profit,” he said of the banks. “I also have every right to take my money out of there, and that’s what I did.”
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Continuing coverage
The AJC has been out front with coverage of the financial crisis that has gripped the economy. Georgia’s banking industry has been among the hardest hit. Today, the AJC looks at how new debit card fees announced by big banks may affect community banks, credit unions and consumers.
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