A special post from Derek F.
Smart consumers know the value of shopping around for goods and services, whether they’re looking for the most reliable mobile phone provider, researching the cheapest energy service, or trying to find the best lender. But many people who are savvy shoppers for most other items – from groceries to fuel suppliers – take their banks for granted. Perhaps the staid image of banks that many people still harbour discourages them from thinking of banking services as a consumer good, and blinds them to the fact that the banks are actively (and sometimes almost desperately) competing for their business. If you are one of those people who have been with the same bank for years without giving it a thought, maybe it’s time to take a second look at your choice.
Flattery may get one nowhere, but bribery might work…
For decades beyond count, the decision of which bank got a customer’s business was a relatively simple one. Most people chose their bank on the basis of either the physical location of the bank or an existing relationship with one of the bank’s officers. Loans were based upon the customer’s character, wealth, and ability to pay, as judged somewhat arbitrarily by the bank officer. With the opening of branch banks, the implementing of regulations on banking operations, the ownership of most banks by financial corporations, and the onset of full-service websites and smartphone banking apps, the choice of which bank to patronise has grown increasingly complex. And in many cases, the handshake that once sealed the relationship has been replaced by a username and password.
Since there are constraints upon things like the interest rates and fees a bank may charge, banks have had to get more creative in their efforts to draw customers. More and more, banks are offering incentives, from cash to store gift cards, to entice people to switch their accounts from their present banks. They call such offerings incentives, but it really comes down to legal bribery. There is no judgment implied in that statement; rather, it has simply become an accepted norm in the financial world. In any case, several major banks are offering attractive deals to customers who are willing to come on over to their side.
Cash Incentives
HSBC, for instance, offers fast cash to new customers, while its Internet and telephone banking offshoot, First Direct, offers even more to new First Account customers. In both cases, there are some restrictions, such as minimum initial and monthly deposits, as well as a requirement to maintain a specific minimum balance.
Special Considerations for Students
While students are often amongst the most financially challenged consumers and have to watch every penny, to the banks they are very desirable customers. Banks are well aware that students stand to earn higher-than-average wages once they graduate, which will likely be handled by whichever bank welcomes them and best meets their needs. For this reason, banks offer numerous incentives for students, such as liberal and often interest-free overdrafts, which students can use to either fill the gap between end of money and end of month, or deposit in savings accounts to begin establishing good saving habits.
These incentives are, as intended, particularly attractive to students, and have proved to be quite popular. As with any other financial transaction, however, the student customer needs to not be seduced by “free” incentives that could actually end up costing more than they are worth. He or she also needs to develop good financial habits, such as keeping a close eye on accounts, making payments on time, and regularly checking his or her credit score.
The big banks have been the targets of harsh criticism in recent years, much of it justified. But the fact is that like any other business, they can’t survive without customers, and they’re very well aware of it. Another point of which they’re aware is that alternatives to traditional banks are springing up. They have to remain competitive and in some cases may even be willing to negotiate with a consumer seeking a better deal. In short, even in our highly cautious, post-recession financial world, consumers do still have a bit of leverage, and they should use it to get the best deal possible.
