Come, check bouncers….we want you….

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I was in Washington Mutual the other day, and noticed that they were promoting the features of their “Free Checking” account. Very prominently on the poster was this offer:

One free waiver of an Overdraft/Non-Sufficient Funds fee per year

I looked at their ad and thought, what a strange offer! Why would they want to offer that? Isn’t that highlighting an experience that makes people feel bad (bouncing a check) and reminding them of it?

Then I remembered that Washington Mutual took the lead in raising bounced check fees. Why are they offering one free bounced check (NSF fee) per year? Because that would appeal to people who bounce checks! And those people are more likely to generate fee revenue for Washington Mutual than others. If you have trouble with bounced checks, don’t look for one free bounced check; if this is a concern for you, you probably have more than one fee per year to deal with. Look for the lowest bounced check fee in your area. According to Bankrate, the lowest NSF fee from a traditional bank in San Francisco is $19 per incident from Bank of America or Comerica, and Comerica looks lower on other fees, like ATM fees. Washington Mutual is $6 higher per incident. If you bounce five checks in a year, Comerica would save you $5 total versus Washington Mutual, even after Washington Mutual’s “free” offer.

No company will give you anything for free unless they think that will lead to getting more money from you later. Whenever you see an ad like this, think, “Who are they trying to appeal to?” Even if you decide to go with that offer, you’ll at least have a better picture of what you’re getting into. When I saw this ad, I thought, this bank is a bad deal for people who bounce checks.

Of course, a better tip is “Don’t bounce checks.” But, very often, people will choose the account that best fits the way they want to be, not the way they are. Don’t let that become a profit line for your bank.

5 Responses to “Come, check bouncers….we want you….”

  1. 7thseer Says:

    Slightly off topic, but:

    To a person from scandinavia this whole check usage seems unnecessarily cumbersome, why should money be transferred physically between locations when money is stored in digital form in banking systems anyway. Here for example salary is paid directly to your bank account, and an average person doesn’t ever need to handle checks.

  2. Marc Hedlund Says:

    7thseer, thanks for the comment.

    I don’t think that’s off-topic at all! In fact I think it’s very interesting to see the different ways money transfer takes place in different countries. I don’t know anything about the history behind the differences, but I’d love to hear about that from anyone who does know.

    Check usage in the US is definitely on the decline. Many US consumers are using online bill pay through their banks, most of which provide that as a free service. Even at that, the banks are starting to convert checks into electronic payments (so if you write a check to the electric company, it will appear in your account as though you’d given them a credit card payment, and if you use online bill pay, a physical check may not be written at all).

    This is on-topic because it relates directly to the costs and profit banks can expect from each model. This is another reason WaMu’s ad was interesting — with this offer and with their offer of “Free checks for life” with the same account, they’re marketing to people who use the older American style of money transfer. I see why in the NSF fee case, but I wonder if there’s something more general about US consumers who still use checks extensively that makes them better customers for WaMu.

  3. Robbie Wright Says:

    I think that WaMu did a study of their new customers and found that many of them were leaving after their first NSF. By waiving the first NSF and getting the new(er) customers to stick around longer, they will make all that money back that they waived.

  4. Anthony Says:

    I’ll tell you what, I am a Wamu member, I have personal checking & savings accounts, joint checking & savings accounts, and 2 business accounts with them but my reasons for joining had nothing to do with their recent push at 1 free overdraft or check bouncing fee, simply because I dont write checks, it was because of their nice business account features and the fact that my previous bank (Wells Fargo) liked to charge me $7.95 a month for paying my own damn bills. Though, when people ask me if they should join Wamu becuase they are unhappy with their current bank my answer is usually ‘no’ unless they have their finances in order, because of the same reasons you talk about in this post. Its not that appealing to me because since I almost never write checks and usually have my finances in order I almost never worry about it, but its good for me because every now and then, no matter who you are, you have to write a check for something.

    I’ve lived in Vegas my entire life (minus my years in the Marine Corps) and I’ve dealt with 3 major banks here, and I’ve left 2 of them for various reasons.

    Bank of America: Which is actually “Bank of -whatever state you live in-“. If you move out of state or are currently in a state where you did not open your account, good luck getting your own damn money out of your account because for some reason the Bank of America branches cannot access account information accross state lines.

    Wells Fargo: Which is a halfway decent bank except for their rediculous bill pay charges (mentioned above) and the fact that they won’t lock your checking account when its in the negative. I had a small incident one night where I used my check card at an ATM 3 times to get money (I know this is bad juju, but it happened) and it never told me I was at a negative balance and charged me $33.50 for each withdrawl. I understand that this is mostly my fault, but I would like my bank to let me know that I am in the hole so I could stop acting a fool.

    Wamu: Lastly is Wamu. Since I have my stuff together this has been a great choice for me, they have great business accounts, and my fiance and I are happy with the joint account we have that allows us to send free wire transfers, free bill pay, etc etc. So, yes, while I do not agree with Wamu’s marketing strategy alot of the time, they can be a great bank, if, like you said, they most adequately fit your lifestyle.

  5. Will Jones Says:

    Not only that, they also want those who deposit returned checks. I got a $12 returned check fee. They debited my account for the item plus the fee right away. Without warning. The notice came a week later. In the meantime, I started bouncing away (actually overdrafting) on many, many payments. If you use bill pay and pay small amounts, each overdraft = $33. So look for hundreds and hundreds of dollars in overdraft charges. So I scramble to cover the amount, I put in $1000 personal check from a relative thinking I’ll get out of the red. Nope. 1 week hold on personal checks. Bounce bounce away some more. Score. Oh and they charge $5 to show me which item got returned. Not part of the $12 returned item charge. But this is a week after, without notice, they debited my account. Which started the whole mess in the first place. Spit on you after beating you down. Awesome.

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