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Bank One rescinds teller fees

Just 25 minutes after Chicago's Bank One announced customers with no-frills checking accounts would have to pay $3 to hand their paycheck and a deposit slip to a teller, employees at Community Bank of Elmhurst in Illinois changed the sign out front to read, 'Switch to our bank and we'll pay you 25 cents.'

That was 1995. The quick-thinking promotion cost the little bank $290.25 in quarters, and it was worth every cent.

"It was a fun time. A bunch of people came from other banks. They said you guys seem to have the right attitude. I got nicknamed the Mayberry banker," says William Gooch Jr., CEO of Community Bank of Elmhurst.

For Bank One, the sixth biggest bank in the country, it may have been a lesson in customer relations. The bank is eliminating its $3 teller fee in its Chicago-area branches and is reviewing the fee in other states.

Charlie Scharf, the head of Bank One's retail banking group, told reporters, "We've been presumptuous about our market share. We haven't done a great job in Chicago."

It's widely believed Bank One and others in the industry wanted to encourage customers with less profitable accounts to use ATMs and quit taking up valuable teller time.

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Some customers took their business elsewhere, and it's likely that many potential customers never considered Bank One because of the fee.

Human costs
Teller fees are one of the more controversial banking fees, and nationwide not many banks or credit unions charge for taking a teller's time. But two other Chicago banks, Harris and LaSalle, have teller fees on certain accounts. Both banks say all fees are reviewed on an ongoing basis, and they have plenty of accounts that don't impose the teller fee.

"The way we've positioned it, only a small percentage of our customers are assessed it. When we understand our clients' banking habits, we can put them in an account that avoids the fee," says Paul Pallardy, vice president at Harris Bank.

Accounts that have teller fees are designed for people who like to do most of their banking by ATM, telephone or online. Still, when customers need to talk with a teller they don't appreciate paying a fee, says Bert Ely, an independent financial analyst and consultant based in Alexandria, Va.

"People expect to go into the branch and see the teller. You don't pay a fee to the cashier at the drug store. Everybody has a bad-check charge. But you have to be competitive; not just in terms of prices but also what you charge for and what you don't charge for."

In addition to canceling the fee, Bank One announced a new free checking account and says it will open 30 new branches. In so doing, it joins a long list of banks that have recently announced free checking and additional branches.

"There was a period a few years back when everybody thought the branches would go away. They were hoping ATMs would take over for branches," says banking consultant Gary Stein of Capital Performance Group, a Washington, D.C., firm.

"Customers would use different delivery channels and banks used vinegar or honey to get them to do it. Now, they're building branches. They know it's key for acquiring customers."

Does this mean a few years from now the pendulum will swing the other way and customers will get pushed out the door again, or will banks stay in the customer-friendly mode?

No substitute for a smile
William Gooch doesn't believe in trends, he says, because good, old-fashion customer service never goes out of style.

"They haven't learned their lesson. I don't think they get it, and I don't think they care if they get it.

"We're a community bank. We have a real person answer the phone. If the person who answers the phone isn't the person you need, we go get them.

"You call a big bank and it's punch 1 if your house is being foreclosed on; punch 2 if your car is being repossessed; punch 3 if you have diarrhea ... "

Bank One may be trying harder to make sure that description doesn't fit them.

"We're also offering new extended branch hours and more relationship managers who will sit with you and help you open an account or apply for a loan," says spokeswoman Calmetta Coleman.

Both banks and customers -- who may have thought they only wanted to bank by telephone and ATM -- are realizing they don't want to be buttonholed, according to analyst Bert Ely.

"Bankers are taking a more holistic view in how they look at the delivery of banking services to customers. Whether it's branches, ATMs, call centers or the Internet, customers like to deal with their bank in their own way."

While other banks revamp their strategies, nudge customers out the door, coax them back in, merge, acquire, or go out of business, William Gooch and his employees will have their bag of quarters and the sign out front, ready to capitalize on other banks' mistakes.

-- Posted: Dec. 27, 2002

See Also
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