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Sweeping you into the bank

Forget about camping gear, binoculars, beach chairs or cookware as rewards for opening a free checking account. Oh, plenty of financial institutions still try to entice you with that stuff. But now there's much better loot available.

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Wouldn't a Dell 19-inch LCD flat-panel TV be great in the bedroom? An iPod would be cool. Then again, having $1,000 worth of bills paid by the bank would be a nice break.

Banks are raising the bar when it comes to attracting new customers or encouraging current customers to sign up for additional services. The competition for your money is fierce, and retail banking is looking like the auto industry, where customers won't step on the lot unless they can get zero-percent financing or some other incentive.

Many sweepstakes are tied to online bill-payment services: Sign up for bill pay and you'll be entered into a sweepstakes with every bill you pay. Financial institutions like it when customers use their online checking account to pay bills online because it becomes very inconvenient for you to switch banks.

But banks are looking beyond so-called "stickiness" when setting up sweepstakes tied to online bill payment, says Jeff Bargerhuff, senior vice president and marketing director at Nevada State Bank in Las Vegas.

"If they have bill pay, they have online banking. If they have online banking, they have a checking account, typically a noninterest checking account. We want that demand deposit account. When people have bill pay, they keep lots of money in their checking account so they can pay their bills."

Bargerhuff's bank is running a yearlong sweepstakes where each month one winner is reimbursed as much as $1,000 for bills paid through online bill pay the previous month.

Pittsburgh's PNC Bank is also entering customers in a sweepstakes for paying bills online. Winners can choose an iPod or $300 worth of Marriott travel cards.

"When you're trying to create a sweepstakes, experts say there are three leading items -- cash, electronics and travel," says Dan Tuccillo, senior vice president of product management for PNC. "The iPod is hot, and look at the people attracted to it. Obviously, they're computer users; they have higher incomes and higher education. You've got to understand the target market. It has to be a relevant product or service that you're offering."

Banking industry analyst Bert Ely says banks are like any other retail business; they have to compete for new customers and, he says, bank accounts will get stickier.

"Mortgages aren't sticky because people refinance away. CDs are seen as a rate-driven product. Retirees who invest in CDs will switch for 5 basis points. Transaction accounts are more valuable. The sweepstakes may represent a change in the product that extends the duration of the relationship with the customer."

Not all sweepstakes require bill pay. At Hibernia National Bank in New Orleans, La., a recent sweepstakes advertised a $10,000 cash prize. Current customers who got a friend to open a checking account received a free gift and were entered in the sweepstakes.

Simsbury Bank & Trust in Connecticut had a free checking sweepstakes that awarded $1,000, $500 and $250 landscaping certificates to three winners.

Sweepstakes fever isn't restricted to the good old U.S. of A. Canada's RBC Royal Bank upped the ante significantly with its $25,000 home renovation contest. Customers who had a mortgage with the bank were automatically entered, but any customer could enter by sending in a 100-word essay on "How I plan to use $25,000 if I were to win the home renovation contest."

Consumers can expect to see more sweepstakes -- because they work. They're an economical way for banks to pull in new customers and get existing customers to sign up for more services and stuff more money in their accounts.

But some banks, such as Citibank, are eliminating the gamble of entering a sweepstakes -- and that might prove to be more alluring for potential customers. Citibank is giving away an iPod shuffle to customers who fund their account with $1,500 and pay two bills online each month for 12 months. That's not much of a stretch for a lot of people.

Maybe someday banks will give away the latest electronic gadget just for opening a free checking account without the hefty balance requirement. Just remember, sweepstakes and freebies are fine as long as the account and the terms are right for your needs.


-- Posted: May 10, 2005




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