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How people really pick a bank

By Marcie Geffner · Bankrate.com
Wednesday, August 25, 2010
Posted: 9 am ET

Did you research your bank's interest rates, fees, services, safety and soundness before you opened your account? Or did you choose your bank because there was a branch near your home or office or you responded to a promotion?

Research is recommended and for good reason as David McMillin reports in "Service, safety key issues when picking banks" on Bankrate.com. Given the risk of bank failures and rise in consumer dissatisfaction, he writes, it behooves consumers who are in the market for a new bank to do their homework.

But my own suspicion is that few people have the time, patience or inclination to do this sort of thorough due diligence into countless banking options that include not just major banks, but also regional banks, credit unions, online banks and other types of financial institutions that offer banking services. Sure, some people do quite a bit of research, but I imagine they are in the minority. (And banks surely know that since they make such a hash of their marketing and disclosures.)

It's easy to conclude that consumers who don't do proper research before they choose a bank are apathetic, lazy, stupid, gullible or whatever.

But perhaps banking customers are really much smarter than that.

Perhaps they don't do much research because they've already figured out that the differences between banks just aren't meaningful enough to matter to their daily lives. One bank may offer a fractionally higher interest rate or a slightly lower fee on one infrequently used service or another, but those small differences don't justify the time they'd have to spend to find out that information at such a detailed level.

Perhaps most people do a little research, but not a lot of research. They find out just enough to assure themselves that their deposits will be FDIC-insured and that the bank's fees and policies appear to be fairly standard stuff.

So, how did you choose your bank? Did you do all the research? Did you make a snap decision? Or did you find out just the few facts you needed to know?

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6 Comments
Marcie Geffner
September 07, 2010 at 9:52 pm

Good comments, thanks, everyone.
Customer service certainly should be considered in choosing a bank even if you mostly use the ATM because one day you might need help to open or close an account or apply for a loan.
I hadn't thought of the lack of differentiation as a brand-awareness issue, but it's an excellent point (the same might be said of real estate brokerages as well).

david
August 27, 2010 at 11:41 am

I want to refinance for 8 years only. Can't find any banks who offer this.

Jeffry Pilcher | TheFinancialBrand.com
August 26, 2010 at 6:35 pm

Marcie, you nailed it: "Perhaps they don't do much research because they've already figured out that the differences between banks just aren't meaningful enough to matter to their daily lives." I don't think I've seen anyone summarize the state of financial brands more succinctly.

I still think the majority of consumers choose the bank for their primary checking account based on the proximity of a branch (near work or home).
Note: The readers of this website are more curious, savvy financial consumers by default.

Pierre
August 26, 2010 at 2:59 pm

I look at the reinforcements of the building and especially the bank vault. It must be of steel-reinforced granite (marble facing ok), with bars separating the tellers from the customers. There must be sufficient evidence of security around (several uniformed, armed guards and a loud outside alarm). The time-locked door to the vault must be at least one yard wide with multiple locks.

Kris
August 26, 2010 at 11:13 am

When my old bank's service started to go downhill, I asked around before I switched banks. My research had less to do with rates and fees, more to do with customer service. So far I haven't been wrong; I've been with this bank for 6 years without any major headaches.

AM
August 26, 2010 at 10:18 am

I do a fair amount of research, but it's safe to say that most people don't.

If they did, most banks wouldn't feel the need to offer free stuff with checking accounts and build a branch every 2 feet. ;)