Citibank's iPod offer was just the beginning. Here's what others are doing to woo customers.
These days, banks are opening their wallets wider than ever to lure new customers and keep existing ones. The goodies include everything from iPods, DVD players and BlackBerries to rewards programs that dole out points redeemable for all sorts of things. Some banks are even opening their doors on Sundays to provide what consumers typically don't associate with their bank: convenience.
Not long ago, banks, especially large ones, weren't particularly interested in the average-Joe customer with a checking account and a few thousand dollars in savings. "Banks went through a period in the late 1990s when all they wanted to do was service customers who were rich," says James Gresham, president of Rennhack Marketing Services, or RMS, in Grapevine, Texas. "(They) weren't focused on the majority of the population."
No longer. After a period of aggressive mergers, some of which haven't panned out, banks have realized that the best way to expand right now is via organic growth, Gresham explains. In other words, they need to focus on attracting more retail deposits from new customers and work harder to keep their existing ones.
The result: a potential bonanza for customers. These days, shopping around for a checking account is not only wise, but also kind of fun. Herewith, a roundup of some of the most generous gifts and programs that banks are throwing at consumers to woo their business, along with some of their potential drawbacks.
1. The New Toaster
Citigroup's (C) Citibank made news last year when it started offering Apple (AAPL) iPod Minis to new customers. The requirements: opening a checking account, depositing $2,500 and making at least two online bill payments each month for a year. The bank is now running a similar promotion that requires a $1,500 deposit and two online bill payments a month for a year. The new loot, a 512Mb iPod Shuffle, ships approximately 90 days after the first two bill payments. The catch: Fail to pay make online payments and the bank will charge you $99.
For those who prefer cash, Citibank runs a similar promotion that pays $100 after three months and another $100 after 12 more months, during which at least two bills must be paid online each month.
PNC Bank (PNC) -- with branches in Delaware, Florida, Kentucky, Maryland, New Jersey, Ohio, Pennsylvania, Virginia, and Washington, D.C. -- offers a BlackBerry to everyone who opens a new checking account. The catch: You must sign a two-year service agreement with Cingular with a $36 activation fee and a $74.98 monthly plan. In addition, you must pay $150 for the BlackBerry upfront and then file paperwork for a rebate. In a separate promotion, if you apply and qualify for a home-equity loan or line of credit, PNC Bank will give you a $50 Home Depot (HD) gift card.
At J.P. Morgan Chase's (JPM) Chase Bank, meanwhile, customers who have a checking and savings account can receive Home Depot gift cards of $15, $25 or $75, depending on the type of additional account they open. Promotions change each quarter. Previously, the bank had partnered with Sony (SNE) to offer DVD players and gift certificates redeemable for CDs.
For more details on the offers currently available, see the table below.
2. Banking on Rewards
Several weeks ago, Citibank extended its ThankYou rewards program to its banking services. Currently, all customers who have a checking account with a debit card can qualify for rewards points if they have two or more additional services with the bank. Those include products like a savings account or a CD, or services like direct deposit or online bill payment. The more services a client has, the more points he or she earns. Customers can also earn points by using their debit cards, at a rate of one point for every two dollars spent. If you already have a credit card that earns ThankYou points, they will automatically be merged with the points accumulated through banking.
With this program, "Citi has fundamentally changed the game in the banking industry," says Bill Hanifin, loyalty program consultant with Colloquy Group, a loyalty-marketing information group in Milford, Ohio. He expects the other large banks to respond with similar programs in the next 18 to 24 months. "They will all have to address the fact that they need to take rewards out of the credit card silo and adopt them in the bank," he says.
Wachovia (WB) has announced a similar initiative, called the Honors Program, which is targeted at higher-end customers. The program is open only to those who have at least $75,000 in Wachovia account balances (including outstanding balances on credit lines and mortgages, according to a company spokeswoman), and is currently available only in the Northeast. The rewards can be impressive: You receive a point for each $20 you have in bank deposits, investments or credit lines. Just by way of satisfying the program's $75,000 minimum requirement, members earn 3,750 points each month. But don't rush to take out a home-equity loan just to qualify. As you pay down the loan balance, you'll find yourself ineligible once your accounts fall below the required minimum. (Existing rewards points will be transferred to a Visa Extras account.)
For more details on the two programs, see our table below.
3. The New Bankers' Hours
If you care more for convenience than freebies, you're in luck. These days, branches are staying open later and, increasingly, on weekends. While Sunday hours were practically nonexistent in 1999, by 2001 more than half of large banks and 22% of midsize banks offered Sunday hours at supermarket and in-store locations, according to the most recent survey by the American Bankers Association.
Nowadays, some banks are offering full service seven days a week. "It's a strategy to bring people in the door, to maximize your opportunity to make a sale and to gain new customers," says Jim Eckenrode, vice president of banking and payments research with the Tower Group, a Needham, Mass.-based financial-services research and consulting firm.
Commerce Bank (CBH) (with locations in New Jersey, New York, Pennsylvania, Delaware, Connecticut, Maryland, Virginia and Washington, D.C.) pioneered weekend hours back in the mid-1990s, but it wasn't until recently that other banks followed. Among those offering full banking services during the weekend are TCF Bank (TCB) (locations in Minnesota, Illinois, Michigan, Wisconsin, Colorado and Indiana) and Florida-based BankAtlantic (BBX). Wachovia launched extended weekday and Saturday hours in the Washington, D.C., area several weeks ago, and plans to roll them out in other markets, including Atlanta, by the end of the year. Citibank offers longer branch ours in certain locations, primarily residential. Chase spokesman Tom Kelly estimates that on average, Chase branches are open 20% longer -- or 10 additional hours a week -- than they were three years ago. "There's no such thing as bankers' hours any more," he says.
|The New Toaster|
|Citibank||Get a free iPod Shuffle||Offer available only to new customers who open a Citibank EZ Checking account, fund it with $1,500 and pay two bills online each month for the first 12 months at citibankonline.com. Offer expires June 30, 2005.||There are no fees for online bill pay. Citibank EZ Checking account has no monthly maintenance and per-check fees with direct deposit or when you make at least two electronic bill payments from the account. Otherwise, when the $1,500 minimum balance is not met, you will be charged monthly and per-check fees.|
|Citibank||Free $200||Open a Citibank EZ Checking account with $1,500 and pay two bills a month online for 15 months. Offer has no expiration deadline. Get the first $100 when you pay two bills a months for three months. Qualify for another $100 if you continue paying two bills a month for an additional 12 months.||Citibank EZ Checking account requirements apply (see above.)|
|PNC Bank||$50 Home Depot gift card||Apply for a $1,000 or higher home-equity loan, or $5,000 or higher home-equity line of credit by June 30, 2005.
Lowest available rate is 5.24% for the HEL and 6.49% for the HELOC.
|Before you take advantage of this offer, shop around for similar offers from other banks. Then choose the one with the lowest APR rather than the best incentive. The interest you save over the life of the loan or credit line may well exceed $50.
Currently, the national average APR for a $30,000 HELs is 7.27%, according to Bankrate.com, while the average $30,000 HELOC is 4.75%. (Data as of May 19, 2005.)
|PNC Bank||Free BlackBerry 7280/7290||Open a personal or business checking account at PNC Bank. Offer ends June 30, 2005.||Customers will pay $150 for the BlackBerry and will then receive a $150 mail-in rebate. In order to be eligible, must sign to a 2-year contract with Cingular with a $74.98 per-month plan. (Cingular must be used or a comparable provider where Cingular is not available.) There is also a $36.00 activation fee.|
|Chase||$15, $25 or $75 Home Depot gift card (offer available only in branches)||For all three offers, you need to open (or already have) a checking and savings account with Chase.
To receive $15 gift card, customers need to apply for (and receive) a Chase credit card. For a $25 gift card, submit a home-equity loan application. For $75, open and deposit at least $10,000 in a new or existing savings account, 529 plan, CD or brokerage account with Chase. Offer expires July 2.
|Promotion runs in both Chase and BankOne branches.|
|Citibank||ThankYou Network expanded to banking services.||Must have a checking account with a debit card and any of the following additional products or services: direct deposit, savings/ money market account, CD, online bill payment, personal loan, home-equity loan or home-equity line of credit, mortgage, personal loan or credit line.||The number of points received each month depends on the type of checking account and the number of additional products used by the customer. Someone with an EZ Checking account and a total of three Citi products or services would earn 50 points a month (225 points with a total of six services). But someone with a CitiGold checking account (which has higher balance requirements) and three total products or services would earn 150 points a month (900 points with a total of six services.)
In addition to that, receive one point for each $2 spent with the debit card associated with the account.
Points can be combined with ThankYou points earned with a Citi credit card.
|Wachovia||Honors Program||Must have at least $75,000 in Wachovia account balances.
Program is now available in the Northeast, including New York, New Jersey, and southern Connecticut. Plans to roll out the program to the rest of the country in late summer or early fall of 2005.
|Get double points on all purchases. In addition to that, receive one point a month for each $20 you have in either deposits, credit or investments.
Receive two points for each $1 charged on the debit card.
Points can be redeemed for travel benefits with no blackout dates and merchandise with over 100 retailers. Also receive a personal banker and a dedicated phone line for all Honors members (with, presumably, a much shorter wait time).
Points expire 36 months from the day they are posted to the account.