‘Bank Transfer Day’: Winners All Around

Customers, credit unions and big banks all came out ahead

   

Bank customers’ growing disdain with big institutions reached a climax this weekend that was simultaneously symbolic and tangible. “Bank Transfer Day” and “Move Your Money Day,” both falling on Nov. 5, sent accounts flying from the rosters of Wall Street giants into the open arms of smaller regional banks and not-for-profit credit unions.

But on a day that was supposed to leave big banks groaning from pain, the Wall Street firms’ collective response couldn’t be heard above the “ka-chings” of “Main Street” money drawers.

Mostly because that response was a surprisingly indifferent shrug — and maybe even a slight smirk.

According to Huffington Post, almost 70,000 people had pledged to close accounts at big banks before the weekend. Looking a bit further back, according to the Credit Union National Association, more than 650,000 consumers saddled up with credit unions in just more than a month — since the Sept. 29 announcement by Bank of America (NYSE:BAC) that it would begin charging a $5-per-month debit-card fee beginning in 2012. In one fell swoop, credit unions added more new members than they did for all of 2010.

Sounds impressive. And the complete 180s of BofA and other big banks on their debit-card fee stances (as well as other banks’ loud reaffirmations of their charge-free cards) further seemed to illustrate the importance that financial institutions put on stemming the tide of angry customers.

But when you put those 650,000 members into a much bigger perspective, you get a different picture. Even if every one of those defections represented a lost Bank of America account (which they didn’t), it would be a mere scratch — barely more than 1% of BofA’s 58 million retail and small-business accounts.

And they’re accounts Wall Street banks might be happy to lose.

Novantas finance consultant Hank Israel told The New Republic that “the average checking account costs banks somewhere around $200 a year to maintain, just to pay for staff and infrastructure.” It’s no secret: Banks don’t make money off small accounts. They keep you around until you accumulate more wealth, have a bigger account and (hopefully) want to finance things — such as cars and mortgages.

In other words, while the nation’s largest banks might have lost some of this potential pool, the deserters might have eased the banks’ operating costs.

Still, none of this means “Bank Transfer Day” and other such movements didn’t work. To the contrary. The mass exodus of accounts might have had a sublime (if unintended) result: A win-win-win situation.

Unhappy consumers won by performing a much-needed rebellious catharsis by “sticking it to Wall Street” through the wholly satisfying act of physically taking money away from banks that stuck it to them. There’s nothing better than feeling like you’ve set the world right while proving a point — and holding that fat withdrawal check in your hands (even if it’s just until you deposit it down the street) will weaken most anyone’s knees.

Credit unions and small banks were by far the biggest winners, taking on a boatload of new members. According to the CUNA, they’re worth more than $4.5 billion in new savings accounts since Sept. 29 alone — and acquired through perhaps the cheapest advertising initiative in history. A venomous and successful blitzkrieg campaign against your larger, better-funded rivals for a final cost of nothing? OK, even if you throw in overtime for a few Saturday staffers, it’s a good guess that no one was complaining.

And lastly — surely to the chagrin of at least a few disestablishmentarians — Wall Street banks won, or at least came out financially even, if not a little scuffed up in the PR department. They shed customers that currently are a drag on their bottom lines, but not enough of them to cause serious long-term concerns about future account growth. Bank of America and others still have uphill battles concerning how they’ll take their pound of flesh, but this latest row won’t leave them reeling.

As far as uprisings go, this movement couldn’t have been more pleasant.

As of this writing, Kyle Woodley did not own a position in any of the aforementioned stocks.


Article printed from InvestorPlace Media, http://investorplace.com/investorpolitics/bank-transfer-day-bac-credit-unions/.

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