Custom «Bank of America» Essay Paper Sample
Banks in the United States started losing customers in the blink of an eye, according to the Wall Street Journal, millions of customers opted to join credit unions and open account through the unions rather than through the bigger banks. The journal continues to point out that the bigger banks made the decision to target debit card users after choosing to do away with free services and raising banking fees.
The move by banks to introduce a $5 fee for all debit card users proved unsuccessful as more and more clients switched to credit unions and opted to open account there rather than seek the service through bigger banks.
Bank of America and other larger banks in the United States like J.P Morgan and Wells Fargo had disclosed of their new plan to levy the fee to it customers. Banks argued that the move was made to make up for lost revenue incurred each and every year. The Wall Street Journal estimated the loss at $ 6 billion a year. To counterbalance this lost revenue, banks decided to embark on scrapping off debit card rewards, additional monthly fee for keeping up with individual accounts and also ended up raising minimum account balance so that it could make customers stay away from certain fees (Johnson, pg 1).
The major reason as to why existing and potential clients were going for credit unions was for the mere reason that more than half of the credit unions offered a no commitment free checking of individual debit accounts.
According to the journal, more and more potential customers opened accounts at Texas Credit Union as a hired entertainer gave away prizes to potential customers so as to lure them into opening more and more accounts. Most of the customers were excited joining the credit union stating that they liked the services offered by the credit union.
Larger banks however; have acted indifferent of the move by debit card holders choosing to rather open up accounts with credit unions. According to the journal, executives of the large banks seemed not bothered by this move and just watched depositors walk out on them.
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The reason as to why they never seemed bothered was out of the mere fact that individuals who opted for credit unions were considered unprofitable for large banks in the sense that the debit card holders always maintained a small balance deposit with the banks, the customers were also were perceived to purchase a low and insignificant amount of products and that large banks were incurring big sums of money maintaining their accounts.
According to the journal, Moebs services Inc. (a research firm in Lake Bluff III) estimated that it did cost large banks a minimum amount of about $350 to $400 per any given year to maintain a debit account of a single individual( Johnson, pg 1).
The research conducted also implicated that smaller banks incurred a figure that was half the amount spent by the large banks. All in all, immediately the move to increase the levy was introduced some of the large banks like J.P Morgan went against it and decided not to implement it anyway, maybe, for the mere reason that they tried preventing the already significant loss of customers.