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Caviar and Champagne With Your Checking Account?
Doesn’t it seem like every time you turn around, there’s another checking deal where banks dangle cash in front of consumers, begging them to open a new checking account? Especially if part of your job is to seek these checking deals out on a twice-weekly basis? I know, right? What’s strange about these cash bonus deals is that they appear antithetical to the other narrative banks are pushing: that they need to get rid of their less affluent customers in order to remain profitable.

Imagine you make $100,000 a year. That was nice, wasn’t it? Now imagine that a bank asks you to open a new checking account and jump through a bunch of hoops within a narrow timeframe, and the pot of gold at the end of this tedious rainbow is $100. At $100,000 a year, you make $100 roughly every two hours — why would you bother with this?

Indeed, the only sorts of people who would be moved to go through all this trouble are people for whom $100 is a lot of money, or at least worth the trouble of switching bank accounts — which is not exactly a friction-free process. Simultaneously, banks have been crying crocodile tears, claiming that new government regulations have forced them to boot the poor from the banking system.

“It is pretty screwy,” said Ron Shevlin, Senior Analyst at the Aite Group, in a phone interview. “It seems like they’re talking out of both sides of their mouths.”

For banks under the Durbin Amendment’s $10 billion asset cap, it still makes sense to run these promotions, he explained. So long as a bank can make their money back on debit card swipe fees, they’d be wise to lure new customers — so long as they can afford it. Additionally, as loan demand increases — in recovering housing markets for example — banks will need to scare up more deposits, he added.

But these deals aren’t limited to small banks. Chase has a $150 cash bonus on offer; Citi is offering $100, PNC too.

Even these giants will make some money off of debit card swipes, explained Shevlin, even if it does appear to be at odds with their bellyaching over their “less profitable” customers. Banks don’t make a penny off cash transactions, and it costs them money when you write a check. With debit, at the very least, they’ll get some money, he said.

There’s an alternate explanation here, too. It could be the result of a bit of dysfunction between banks’ marketing and finance departments. “That does happen a lot,” said Shevlin.

“They will run a promotion because the CEO says ‘We need more customers.’” Marketing departments are good at attracting new depositors, especially by giving away iPods or cash. But months later, branch networks complain that they only brought in lousy customers. Frequently they leave within the year, said Shevlin, with iPod, toaster, or $100 in hand. Some banks have introduced clawback provisions to their promotions to ward off these profiteers.

But not everyone has done so. You can still make $100 off a bank if it’s worth your time. And if it’s worth your time, you probably don’t have that much money. Maybe the banks should start giving out beluga caviar, champagne and yachts — see if it attracts a better-heeled clientele.

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