By: Daryl Tolliver
Many consumers know the dangers and lost opportunities associated with hoarding cash in their mattresses, rather than depositing it for safe keeping a bank. However, this is exactly what more Americans are doing.�
The number of unbanked and underbanked Americans has grown in recent years as customer satisfaction with big financial institutions wanes and distrust over Wall Street banking strategies increases. A 2011 report from the Federal Deposit Insurance Corp. found that 8.2 percent of U.S. households - or 10 million people - currently lack access to basic checking and savings accounts. Instead, more consumers are opting to pay with cash and rely on alternative banking services to conduct financial transactions. There are a number of reasons this scenario is trending, but a recent Forbes analysis highlighted one of the most common reasons: bank fees.�
Excessive fee structures diminish value of accounts
Although fee income is not a new source of revenue for banks, many larger institutions have been forced to rely more heavily on it to combat lost profits from new federal regulations. In addition to introducing new fees to the mix and eliminating valuable rewards checking accounts, many financial institutions have also increased existing fees to higher amounts. This includes fees related to overdraft protection, maintenance, minimum balance, paper statements, debit cards and ATM transactions. A number of studies reveal that many consumers are blindsided by these fees, do not know what they relate to and received little assistance from representatives in the way of explaining the added costs. As this occurs, the cost of holding a checking and savings account rises for many households that are trying to save money. This loss of value may be a strong contributing factor to the higher number of people who are turning their backs on traditional banking services.�
This phenomenon, while widespread, is primarily geared toward larger banks, which have seen their customer numbers decline in recent years. Community banks and credit unions have actually seen a significant rise in the number of customers they service. The fact that most of these institutions maintain free checking accounts, provide high-value cash back reward programs and maintain reasonable and consistent fee structures is no coincidence. Instead, it demonstrates what consumers are looking for in an institution and the ways in which banks and credit unions can continue accomplishing their retention and acquisition goals.�