Chances are you have an account with a big bank. No, really. There is almost a 1 in 2 chance that you have an account with a Top 10 bank and a 1 in 3 chance that you have an account with one of the Top 3 largest banks.
So, there’s a pretty good chance you have an account with a major bank, and guess what?
There’s a pretty good chance you hate it.
Net Promoter Scores for the major banks are extremely low, with local banks and credit unions faring much better. And most likely if you do like your big bank, it’s because you happen to have a local branch that you like, not because you like the bank itself.
So, if people are so dissatisfied with their big banks, why do they stay? Usually when consumers are stuck with a large company they do not like, it is because of a lack of competitors in the space. However, the financial services industry in general and the banking industry in specific are highly competitive.
And still, most people act like they are handcuffed to their bank.
Not even a public outcry on the front page moves the needle that much. When a few months ago there was a public revolt against increased debit card fees, the big banks quickly backed down, causing the drama to disappear from the front page and a lot of the threatened attrition to evaporate.
Indications are that people will not be moving their accounts in any significant numbers in 2012.
The only real question is why?
Bank Convenience for the Win
In my humble opinion, the reason most people stay in their unhappy banking relationships is what economists call switching costs or barriers to switching. Now barriers to switching can be substantial — such as a contract or geographic distance — but in the case of banking, it is rarely anything so clearly delineated. In the case of most banks, barriers to switching are what most of us call the hassle factor.
It costs almost nothing monetarily to switch banks. In fact, you will often save money by finding better deals and competitor incentives.
But a new toaster can’t buy you your life back.
Let’s look at some of the bank conveniences that make switching from any institution, but particularly a “big bank,” an incredible hassle.
- Your large bank has ATM’s everywhere and you travel
- Your large bank has a branch where your child or other dependent lives
- Your mortgage is with your big bank and your bank accounts and credit lines are tied to it
- Your credit card is with your big bank and acts as an overdraft protection device
- You have multiple accounts all tied together online
- You have numerous bills setup on auto-draft on your current account
- You have numerous memberships setup on auto-draft on your current account
- You have your employer’s direct deposit setup on your account
- You have retirement auto-drafts setup on your account
You get the point by now, don’t you?
By the way, if you are a small business or franchise owner, double the hassle factor above for each business you own.
What is truly interesting about the above list is how much of a win it is for the banks. With the exception of more bank branches, every one of the conveniences above saves the banks money! Whether by design or by happy accident, the banks have given us greater convenience and at the same time increased their profit margins and trapped us in a prison of I-have-better-things-to-do than deal with switching banks right now.
How Can You Escape Those Bank Convenience-Cuffs?
So, if you are stuck with bad customer service and a tight pair of convenience-cuffs, what can you do? As far as your existing accounts, nothing much without some major hassles. The quicker you want out, the more hassle it will be. However, there are three things you can do to set yourself up for the future.
- Don’t Double Down on Convenience — Now that you see what a trap these conveniences are, don’t let yourself fall in further just for the convenience of having your accounts “all together.” Getting a new mortgage? Opening a new account? Find a bank you like and want to be with.
- Slowly Start to Move — If feasible (it won’t be for everyone), setup a second account at the bank where you want to be. Then slowly start moving some of the easy things, gym memberships, online accounts, etc. You can usually split your direct deposit. It takes some planning but can make transitioning easier.
- Find a Better Local Branch in Your Area — If the convenience-cuffs are on pretty tight, then shop within your bank’s network. While they will all be subject to the same mind-numbing bureaucracy, all bank branches are not created equal. Shop around; it might not be so bad on the other corner.
So, do you love your bank? Hate your bank? Have you stayed with a bank simply because of the hassle factor?