Friend or foe? Banks hope you'll think of them more kindly this year by offering a slew of new products aimed at making life easier for customers. But that convenience, along with pretty much everything else your bank offers, will likely come at a price. In fact, consumers should expect to spend a lot more on fees this year as banks look to replace the money they expect to lose once new credit card rules go into effect next month.
Come February, the Credit Card Act of 2009 will be put in place. The act is generally considered among personal finance experts to be a good thing for consumers -- for instance, credit cards are going to have to be more upfront about their fees and interest rates, and won't be able to raise interest rates on current balances unless a customer is at least 60 days behind on a payment. But the move is bad news for the banks, which claim that they stand to lose $50 billion a year due to these changes, according to The Wall Street Journal.
So what's in store for you at your bank? Well, keep in mind that most of what follows are predictions and possibilities, but with that caveat in place, here's what seems to be shaping up at banks this year.
New, obscure fees: As the Wall Street Journal reported, the newest fee on the block comes from the World Financial Network National Bank, which now charges its customers $1 if they get a paper statement in the mail.
Don't think this affects you? Well, you may be wrong if you have a store card with Victoria's Secret, Gander Mountain, Talbots, Pottery Barn or any of the other dozen or so retailers that use World Financial's services.
Good-bye, free checking: Don't panic yet. This hasn't happened and it may not happen. But the Wall Street Journal predicted that it will, and now suddenly so are a lot of other news outlets, including a local ABC station in Chicago. Is it just herd mentality or the truth? Probably a little bit of both. I interviewed someone from a prestigious banking consultancy last summer who predicted the end of free checking, and this recent Forbes story refers to how free checking is supposed to disappear.
Yet, I'm going to go out on a limb here and say it won't happen, or if it does, it's not going to last long. If banks start dropping free checking in droves, they will undoubtedly regret it. It's really quite simple: Banks that ban free checking risk losing customers to other banks that decide to keep their free checking accounts.
Interest rates will go up, up, up: OK, we all knew that, but to get specific, Andrew Davidson, a senior vice-president at Mintel Comperemedia, predicts that we're going to see a higher interest rate for purchases and cash advances and higher minimum monthly payments on our credit cards.
New products: This looks promising at least. A new service or product seems at least more useful than a $36 overdraft fee. Among some of the new products bank customers can expect could be mobile phone purchases, new rewards offers and person-to-person money transfers.
Bling Nation is a Palo Alto, Calif.-based company that offers mobile payment systems that allow customers to make and accept point-of-sale purchases with their cell phones. (You point your cell phone at an item at the register, and you've bought it). Wences Cesares, co-CEO of Bling Nation, says that it's more secure than cash, checks or cards "since no personally identifiable information resides on the chip."
Of course, businesses and banks have to sign onto this service, and so far, Bling Nation is only available in scattered spots around the country. Current customers include smaller, local banks like the State Bank customers in La Junta, Colo. and the Adirondack Trust Company in Saratoga Springs, N.Y. But it's at least a taste of what should be coming. And this technology is free -- at least so far -- to the customers. The draw for banks and businesses alike is that it's another perk that they can offer customers to distinguish themselves from everyone else.
Cardyltics is another emerging company that specializes in helping banks and merchants to easily offer rewards to customers. If Scott Grimes, founder and CEO of the Atlanta-based Cardlytics, has his way, you'll soon see rewards offers on your online banking page. "They simply click an offer on the transaction page, see the offer details and use their card to make the purchase--automatically earning the reward," says Grimes. "They don't have to leave the bank website, print coupons or do anything new at the point of sale."
PNC Bank, on Monday, announced a new person-to-person service that allows customers to send money to anyone with a U.S.-based banking account using just an email address or mobile phone number.
More junk mail: Davidson at Mintel, which tracks direct marketing from financial services companies, recently predicted that customers will see more direct mailings (oh, goodie). I know, don't they do that already? In any case, expect it to get even more relentless.
As we tread further into 2010, the savviest banking customers will begin to realize that their bank feels a lot more like a retail outfit. To the banks, you're doing more than just storing your money at their institution, you are a potential paying customer and they will do everything in their power to entice you to pay fees or use their services. It's no secret, for instance, that every time you use a debit card, your bank makes money.
That doesn't mean you shouldn't trust banks. Some financial institutions are going to strive to be solid, dependable and transparent, and others are going to be more stealthy in how they attempt to bring in revenue from your money. And, as Davidson said in his recent webinar, not all of the changes going on with banks are bad for customers. For instance, when a credit card receives a payment, they have to process it that same day, and when you make a payment, they're going to be applied to the purchases that have the highest APR first. In fact, many of the changes coming are very good, which, as noted, is why banks are going to be doing everything they can to try and make up for lost revenue.
But we're going to have be careful out there. Jim Wells, the president of Wellspring Consulting International, a consultancy for any organization that wants to reach the under- or un-banked, isn't optimistic about where he sees banks going in 2010.
"Banks are escalating their avaricious activities, gouging the American taxpayers who funded the bailout of the nation's banking industry after these institutions caused a global financial crisis," says Wells. "Making matters worse, financial regulators continue to stand by and allow financial institutions to thumb their noses at existing and proposed regulations -- acting more like trade associations than supervisors."
Geoff Williams is a frequent contributor to WalletPop. He's also the co-author of the new book Living Well with Bad Credit (HCI Books).
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