Bank of America’s arrival has local banks competing for customers with incentives
Why settle for “free” when you can have “totally free,” “absolutely free,”
or even “better than free”? Sure, no-fee banking is nice, but don’t you deserve
a $50 bonus for getting direct deposit or making your first online bill payments?
How about a free cake or a hammock chair for referring a friend?
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In a frenzy of competition intensified by the entry of Bank of America into the Rhode Island market, banks are trying to out-“free” their rivals, giving out perks even to customers who, as recently as a year ago, had to pay for everything.
Fleet Bank, which hasn’t yet switched to the Bank of America product line but has made its own line more competitive, now offers free checking, ATM and teller transactions, free online banking and bill payment, and a free Visa debit card to its Access Checking customers. There’s no minimum balance; all customers have to do to get the bonanza is sign up for direct deposit (without, it’s $5.95 a month).
Citizens matched the package with Green Checking, launched for St. Patrick’s Day, and threw in 150 free checks to get customers started. Also in March, Bank Rhode Island dropped the fee for its ONChecking accounts, which now offer all the perks (but with a 30-check monthly limit) to anyone with direct deposit.
Sovereign, trying to build up its local market share, upped the ante with its Totally FREE Checking, which provides all the perks except for the free bill payments (or free checks), without the direct-deposit requirement. Cranston-based Domestic Bank went farther, offering all the perks for free, without direct deposit, as Absolutely Free Checking. Get direct deposit, and you qualify for “VIP FREE Checking,” which pays interest with no minimum balance.
And in April, Washington Trust launched a product it calls “better than free”: Freedom Checking. Not only do customers get all the perks without the direct-deposit requirement – they get a $50 bonus after they make their first three online bill payments, and if they do get direct deposit, they get another $50.
The Westerly-based bank is also rewarding customers who refer friends and family, giving out gift certificates for a Gregg’s cake or pie. Domestic Bank, for its part, has been giving out tool kits; NewportFed, whose Totally Free Checking product is far more modest, has given away Sony Walkmans, Icecap stadium seats, and now hammock chairs to customers who make referrals.
What’s going on here? After all, low-balance checking accounts can actually lose banks money, given the expense of processing checks, sending out statements, etc. This is why banks have long offered premium free products to customers with high balances – the Citizens Circle Gold account, FleetOne Premier, BankRI’s Custom Banking.
Let’s just say the free market sometimes works to customers’ advantage.
Nationwide, said Jim DeRentis, executive vice president for retail banking and marketing at BankRI, that’s the trend: The whole market is “moving toward a low-fee or no-fee product.”
Then there’s Bank of America, whose impending arrival has whipped up a competitive frenzy across the banking market: Fleet wants to keep its customers and attract more; local banks are pushing the “hometown” angle in contrast to the North Carolina intruder, but know they also have to be price-competitive; Citizens, the giant that sells itself as a friendly local bank, is trying to gain even more market share.
From that perspective, the “free” wars may be a good gauge of the potential each bank sees in the changing market.
Citizens and BankRI, for example, are going as free as they can while still staying safe. Direct deposit guarantees a certain level of activity in a checking account, BankRI’s DeRentis explained, as well as a predictable source of funds; thus the bank can feel confident it won’t lose money on the account.
With the free accounts and free “switch kits” to help customers jump ship with minimal inconvenience, BankRI is definitely pursuing extra personal-account business. But its priority is commercial banking, and that’s what the bank’s leaders talk about most as Bank of America prepares to enter the state: Unlike that out-of-state bank, its people are local, and can give business customers the personal attention they crave.
Washington Trust is also trying to seize that opportunity, but it also sees a major opening to bring new customers into the fold by starting them off with that universally needed product, the personal checking account.
“Core deposits through checking accounts is a great way to build new relationships with customers,” said Elizabeth B. Eckel, senior vice president for marketing. When the Fleet/Bank of America deal was announced last fall, Eckel said, “We wanted to make sure that we had a better product than they were offering.” Every Washington Trust product was analyzed and compared to those of local and national rivals; Freedom Checking was born.
“We’ve had a huge increase in our checking accounts since the promotion started in April,” she said. And as always, every new customer gets a whole series of mailings touting additional Washington Trust products, from home-equity loans, to trusts, to business services. “The challenge for us is to make sure that those accounts build a relationship,” she said.
Washington Trust is also among the few banks offering totally free checking accounts to business customers (Domestic Bank is another). Granted, the “free” wave has brought some new perks to businesses, such as free ATMs and online banking – but minimum balances in the thousands are still the norm, or else fees of $10 or more.
When the Westerly bank launched Freedom Checking for personal customers last spring, Eckel said, it also launched a Freedom Business Partners product, with up to 200 free transactions per month and free online banking and bill payments. To seal the deal with many new customers, Eckel said, the bank began to offer a free year of service, and one thing just led to another. “We just decided to make it completely free.”
