Customers Switch Loyalties as Banks Keep Increasing Fees

October 10 00:00 2011

New York, October 10 ( – Gone are the days when loyalty kept consumers tied to their favorite bank. The current spate of fees and nonstop product pitches has hit customers the wrong way because they are already beleaguered by the worsening economic situation and unemployment. People are fed up with rising fees and are switching business to smaller banks where fees are minimal and service is more personal.

Banks, on their part, are increasing fees in response to the new regulation that caps what they can charge at debit-card transactions at 21 cents, down from 44 cents. They are also struggling to make profits on the spread between the rates on deposits and loans, because of the low interest rates and soft credit demand.

Banks have warned that more fees might be imposed if the government meddles with their profit model. They are now experimenting with different kinds of fees and are watching one another. However, what they are not appreciating is that such moves are only upsetting customers and they will be losing out in the long run.

John Tschohl, president of the Service Quality Institute said that banks are thinking that they can do what they want and that “it is the arrogance of power. These guys are acting like a monopoly, and they don’t listen to their customers.” He further said that “consumers have multiple options when they reach the point of enough.”