Survey Highlights Top Impediments to Switching and Reforms That Would Make Consumers More Likely To Move Their Money
SAN FRANCISCO, July 24, 2012 /PRNewswire-USNewswire/ -- Nearly one-fifth of all consumers with checking accounts considered switching to a new financial institution over the past 12 months according to a new Consumer Reports National Research Center survey released today. The national survey found those consumers wanted to change banks largely because of frustrations such as increased fees for routine services, but the challenge of transferring automatic payments and other factors kept half of them from making the switch.
"Unfair bank practices and rising fees are prompting more and more consumers to consider voting with their feet and taking their money to another bank or credit union," said Suzanne Martindale, staff attorney for Consumers Union, the policy and advocacy arm of Consumer Reports. "But many consumers don't follow through because moving your money takes a lot of time and money and some bank policies make it harder than it should be. We need to make it easier for consumers to switch banks so they have a real choice when it comes to where to keep their money."
A Consumers Union report published earlier this year detailed a number of issues that can make switching banks a hassle. When a consumer decides to switch banks, the first thing the consumer usually does is open a new account at another financial institution, which can take a few days or up to two weeks. Next, the consumer must transfer any direct deposits and automatic payments out of the old account into the new account. Once that has been completed, the consumer must close the account at the old bank and move any remaining funds into the new account. Unfortunately, obstacles can crop up along the way that can turn into real headaches for consumers.
According to the Consumer Reports survey, nineteen percent of checking account holders had considered switching their accounts to a different bank within the past year. Consumers who considered switching were asked to name the top two reasons why they wanted to move their account to a new bank. Among the most frequent reasons chosen:
- 43 percent cited fee increases for routine services.
- 38 percent said another bank was offering better terms
- 26 percent pointed to poor customer service experiences.
Of those consumers who considered switching banks, over half said they were hindered from doing so. Survey respondents were allowed to cite multiple reasons for why they didn't switch. Among the top responses:
- 63 percent said that concerns about the trouble it would take to transfer all their automatic payments and deposits to a new account kept them from switching banks.
- 37 percent indicated that the process would take too much time and effort to complete
- 28 percent said they didn't want to pay any fees to transfer their own money.
Consumers Union has called on Congress and the Consumer Financial Protection Bureau to consider a number of reforms that would make it easier for consumers to move their money and increase competition among banks. The Consumer Reports survey found that a number of these policy recommendations would make consumers more likely to switch banks. Among consumers who considered switching but couldn't for various reasons:
- 47 percent -- or almost half -- said that a free, same-day electronic transfer of funds from the old bank to the new bank would make them more likely to switch.
- 37 percent said that they would be more likely to move their money if their old bank was legally required to reroute all automatic payments or direct deposits to the new account in 14 days.
- 32 percent indicated that they would be more likely to switch if they had a portable account number that they could take with them to a new bank, just like a mobile phone number.
Consumers Union has also recommended that banks should be required to reduce check holds so consumers can quickly access deposits in new accounts; prohibited from reopening accounts after consumers close them; required to provide customers with clear and accessible account closing procedures; and not allowed to assess unfair fees for closing accounts.
For tips for consumers who are unhappy with their bank, see Consumer Report's More Bank Fees Are Coming: How to Fight Back Or Flee.
The Consumer Reports National Research Center survey was conducted in May 2012 using a nationally representative probability-based online panel. Surveys were completed by 1157 adults aged 18+. Analyses were conducted with the sample weighted to reflect national demographics. The margin of error for the full sample is +/- 3% points at 95% confidence. The margin of error is greater for subgroups.
SOURCE Consumers Union