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About Ken Tumin

Ken Tumin founded the Bank Deals Blog in 2005 and has been passionately covering the best deposit deals ever since. He is frequently referenced by The New York Times, The Wall Street Journal, and other publications as a top expert, but he is first and foremost a fellow deal seeker and member of the wonderful community of savers that frequents DepositAccounts.

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Has Online Banking Kept You at Your Bank?


One might think that large banks will lose many of their customers due to the new bank fees and the renewed publicity of the move your money movement which encourages people to move their money to credit unions and community banks. However, banks know most of their customers won't leave. This was highlighted in this New York Times article:

The Internet banking services that have been sold to customers as conveniences, like online bill paying, serve as powerful tethers that keep them from jumping to another institution.

Even with Bank of America's new debit card fee, many people may decide to pay the $5 monthly fee instead of moving their checking account to another bank. A couple of people interviewed in the article said they were mad at the new fees, but they admitted that they would probably stay with Bank of America. One said he had too many online bill paying arrangements to move to another bank. The article quoted a study which shows how online bill payments increase the "stickiness" of accounts:

The 2008 study showed that customers who made five or more payments online a month were 95 percent less likely "to churn," while consumers who didn’t bank online were 43 percent more likely to leave.

Why Banks Give New-Account Bonuses

This shows why banks are willing to offer new-account bonuses. Many bank promotions require not only direct deposit, but also using online bill pay. I just posted on a promotion yesterday that required both direct deposit and online bill pay usage to receive the full bonus. The bank hopes that once you set up online bill payments and direct deposits, you won't easily be able to leave.

Poll Question

This leads me to today's poll question. When you have opened new bank accounts for the bonuses, how long did you keep those accounts opened? Did you close them right after you received the bonuses? Often there are account closure fees if you close an account before 3 or 6 months. So you might want to wait long enough to avoid a closure fee. However, if you are an Average Joe, you will likely keep the account open and you might even start using it.

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Anonymous   |     |   Comment #1
Establishing direct deposit and bill pay with a bank helps to keep the customer tied to that bank (or so they say).  I get these promos and emails spouting information about the convenience of direct deposit and bill pay from different banks all the time.  I have switched my direct deposit several times this year (very easy to do through my employer's payroll website) and have multiple bill payment registrations across different banks.  Most of my bills are automatically charged to a credit card or auto debited directly from a checking account so the use of the bill payment service is limited. I think the bank gets some kind of commission from a customer who schedules a bill payment through them because in some of the literature, it says that the funds recipient foots the cost of the service.  So for me, direct deposit and bill payment are an ever changing option that doesn't tie me directly with any bank.
Anonymous   |     |   Comment #2
Forgot to answer the poll question.  I usually keep accounts open for at least a year to avoid the early closure fee.  However, I have usually kept them open beyond a year in many cases.
operation twist
operation twist   |     |   Comment #3
in this day and age it s urprises me that people do not change  banks  their lame excuse being that it takes to much time is mind boggling and they wonder why  they have virtually nothing and will never be able to retire o well just my cinco centavos
moxfyre   |     |   Comment #4
I keep a spreadsheet of what bills get automatically paid from what checking accounts, just so that it will be fairly easy to switch checking accounts if need be.  That being said, I wouldn't close a checking account until after I'd canceled everything that gets automatically paid from that account, and then waited a month or so to be sure I didn't miss anything.

I don't think most new account bonuses, and the associated hassles, are worth enough to make me try them without some other reason I want the new account.
G.S.   |     |   Comment #5
BofA's $5 fee and all of the other new debit fees banks are beginning to charge are in response to the fall in revenues from debit card transactions that are the consequence of the passing of the Durbin Amendment and the subsequent Federal Reserve ruling to limit debit interchange at $0.22 0.05% of the transaction amount.


Those of us who were paying attention to what was happening knew that this was coming and warned against it.  Here is one of the things we wrote at the time:


What happened was that the government decided that a substantial portion of the banks' revenues would be collected by retailers.  The banks then decided to make up for the shortfall by creating new revenue sources.  Is that surprising?
Anonymous   |     |   Comment #6
G.S. - #5  BOA is a $2.2 trillion dollar institution that just announced it made a substantial profit in the 3rd Quarter. It is now ranked as the second largest financial institution in the country. Its near collapse as the result of overinvestment in shaky mortgage backed derivatives would have had a severe impact on the economy had the big, bad government not stepped in and bailed it out under TARP. It is disingenuous to suggest that BOA can, on the one hand, accept govermment assistance, yet not be subject to government regulation that benefits merchants and consumers. Moreover, its depositors are not, as you suggest, being saddled with debit card fees because of Uncle Sam. I have yet to see any evidence that BOA is losing money on debit transactions because of Durbin. Rather the fees are being imposed simply because BOA isn't making as much money as it would like.

BOA has incurred singnificant losses from the mortgage pools acquired through its takeover of Countrywide. It has also lost money by making bad investments that are only peripherally related to its core banking business. So, by imposing a debit card fee, BOA is actually enlisting its depositors to help pay for past management mistakes.

The limitations on debit card interchange fees were designed to help merchants save money. Since these fees ultimately would be passed on to consumers, I see little reason to suggest that the public should get behind any effort to line BOA's pockets. 

Anonymous   |     |   Comment #7
I couldn't believe how lazy the folks in that NY Times article were. It takes, what, maybe an hour or two to switch all of your auto payments to an account at another bank? If they are that lazy, they deserve to pay the $5 fee. The movers and shakers here would never put up with that!
RJM   |     |   Comment #8
I stuck with my old online bank longer than I should have when their rates came down because I didnt want to have to re-enter all the billpay info as well as learn a new system.

When I finally did switch, I went with one that also used "checkfree" so I knew what I was getting sort of.

I went from Presidential to ING. While ING is better, its worse in that you KEEP UP with weekends & holidays and pay one business day in advance.

At presidential, despite also being with Checkfree, their payments went the same day you schedule them. ING makes me keep track of weekends & holidays and pay 1 business day in advance.

(I tend to pay the due date and not sooner just to maximize my interest income)

ING wouldnt be such a deal but I have lots of money sitting around and thats a good place to store it without any restrictions.

INGs layout is also better in that they integrate the payment system with your account.

But, it also has a bug within its date setting software that doesnt work with the newest version of IE, which I have.

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