SAN FRANCISCO (7/25/12)--About one in five checking account holders surveyed considered switching financial institutions in the past year, according to a new Consumer Reports
National Research Center survey released Tuesday.
Frustration over increased fees for routine services was the prime reason for wanting to switch, but inconveniences such as transferring automatic transfers kept about half from making the switch, the national survey found.
"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."
The results would seem to indicate that more consumers are primed to make the switch to credit unions, nine months after Bank Transfer Day, Nov. 5. During the fourth quarter of 2011, credit unions saw an increase of 737,000 checking accounts, according to the Credit Union National Association (CUNA) (News Now
Overall, credit union membership grew 399,721--to 93,052,509 from 92,652,788 during the fourth quarter, CUNA said.
A Consumers Union report published earlier indicated that when a consumer decides to switch financial institutions, the first thing the consumer usually does is open a new account at another financial institution. This process can take up to two weeks. Next, the consumer transfers any direct deposits and automatic payments out of the old account into the new account. Then the consumer closes the account at the old bank and moves remaining funds into the new account. Obstacles can crop up along the way that can turn into real headaches for consumers, the report said.
Consumers who considered switching were asked to name the top two reasons for wanting to move.
Among the most frequent reasons chosen:
- 43% cited fee increases for routine services;
- 38% said another bank was offering better terms; and
- 26% pointed to poor customer service experiences.
Of those consumers who considered switching banks, more than half said they were hindered from doing so. Survey respondents cited multiple reasons why they didn't switch, including:
- 63% 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% indicated that the process would take too much time and effort to complete; and
- 28% 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 reforms making it easier for consumers to move their money and increase competition. The Consumer Reports
survey cited policy recommendations would make consumers more likely to switch banks.
Policy recommendations that consumer cited include:
- Offering free, same-day electronic transfer of funds from the old bank to the new bank would make 47% more likely to switch;
- Legally requiring banks to reroute all automatic payments or direct deposits to the new account within 14 days would make 37% more likely to move; and
- Offering a portable account number that they could take with them to a new financial institution, similar to a mobile phone number, would make 32% more likely to switch.
Consumers Union 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 assessing unfair fees for closing accounts.