Bank clinginess is an underrated factor in why a lot of people stay with banks they don't like. Between the difficulty of transferring bill pay and other services, and banks' fussy rules on how exactly an account can be closed, banks tend to get all "Fatal Attraction" (or "Fear," if you prefer your psychotic paramours to be male) on you when you try to break things off.
From Robin Sidel of The Wall Street Journal:
Consumers are discovering that it isn't always easy to break up with a big bank.
When Ray Parente decided to pull his money out of Wells Fargo & Co. last month, he was told that he would have to discuss the decision with a personal banker at his local branch in Orange City, Fla.
Rather than wait in a long line to see the banker, Mr. Parente went to a teller window and withdrew all his money -- except for two cents. "I kept as little as I could in there to keep it open just to screw with them," says the unemployed real-estate broker in Deltona, Fla.
From stall tactics to unexpected fees and awkward conversations, other customers of big banks are running into similar snags when trying to move their money elsewhere.
Forcing a customer to show up in person to say goodbye may seem innocuous, if a little inconvenient. But what if you're disabled or bedridden? Or you've moved to a city where the nearest branch of your old bank is 100 miles away?
And that's not even including the overdrawn-with-fees death spiral that can happen with accounts like the one mentioned in the WSJ article. If Parente fails to close that account with 2 cents in it, he'll probably begin incurring a monthly maintenance fee, as he probably won't meet the minimum balance or direct deposit requirements needed to waive the monthly maintenance fees on a typical checking account these days.
After that happens, his account will become overdrawn, and then he won't be able to close it without getting it back to zero, which will mean another trip to the bank and more money out of pocket. If he fails to do that, the bank will continue hitting the account with monthly maintenance fees, until it closes his account for him. Then Parente will probably be reported to ChexSystems, which will prevent him from getting another checking account for at least five years.
That type of spiral can have serious financial consequences, possibly consigning Parente to the ranks of the unbanked, who typically pay more than bank customers for things like cashing paychecks and making cash withdrawals.
I blogged about a bill introduced in October that would have made it easier to switch banks by banning just these sorts of shenanigans. The comments I got were interesting. Some were supportive of the legislation, but a few were more of the "less QQ, more pew-pew" variety; they were basically of the opinion that switching banks is easy enough and why don't you stop whining already. An example, from a reader who frequently posts on the banking blog under the nom de plume "Wolverine":
What's so hard about switching accounts now?
If we really need governments to make this easier, than there is something REALLY wrong with us. I've done this before and it was simple.
The problem with that line of reasoning is, what may be true in Wolverine's experience may not be for other bank customers. There doesn't seem to be any set standard for what banks can require from customers to close an account, and that opens customers up to tactics that can cause everything from annoying inconveniences to serious financial consequences for the crime of not wanting to be bank's customer anymore.