Salem Five is among the banks that are doing everything they can to increase their customers’ use of debit cards.
Massachusetts banks are seeing the debit-card train coming down the tracks, and they’re jumping on board.
Following the lead of banks in Europe and a few of their national and regional counterparts on this side of the Atlantic, North Shore mainstays Danversbank and Salem Five – as well as Florence Savings Bank in western Massachusetts – are doing everything they can to increase their customers’ use of debit plastic.
This spring, the $1.2 billion Danversbank and the $889 million Florence Savings rolled out brand-new, no-minimum-balance checking accounts that offer 6.01 percent annual interest percentage yield and free ATM fee reimbursement at all U.S. locations for customers who use their debit cards 12 times a month, use a direct-deposit or direct-debit option, and receive e-statements instead of paper ones. Danversbank also requires customers to check their statement online at least once a month.
Salem Five, with $2.4 billion in assets, added a Cash Back Debit Rewards feature to its Star Checking and Gold Star Checking accounts on April 20. It gives holders of those accounts cash back, on a monthly basis, as a percent of each purchase they make with their debit cards. The credit is doubled for signature-based transactions.
Danversbank’s Free Rewards Checking account rivals the interest rates offered by online banks such as ING Direct, noted Vice President and Retail Branch Director Judy Vail, except that Danversbank customers actually can come into the bank if they have a question.
In the month Free Rewards Checking has been around, she added, it’s attracted nearly 50 brand-new accounts and 250 switchovers from other Danversbank accounts.
Salem Five Senior Vice President of Retail Banking Janis Dodge said Cash Back Debit Rewards is too new to evaluate, but it’s the new offering she’s most excited about.
“Everyone needs a checking account,” she noted. So adding enticing features to an existing account product seemed like a winning bet.
A second feature recently added to the Star and Gold Star checking accounts is unlimited ATM reimbursement, worldwide.
“I could use it in Paris, Maine, or in Paris, France,” Dodge enthused.
Closer to home, she said, one of her favorite summertime restaurants, the seafood eatery Woodman’s of Essex, only takes cash and has a single ATM – one that charges a $3 fee.
“I tell people [using the ATM] that if you had a Salem Five card, you’d get that money back,” she joked.
‘A Dramatic Need’
Jim Jones, president of the Framingham-based banking strategy firm First Wellesley, said encouraging debit-card use – a new take on better-known credit card rewards programs – is consistent with trends in the consumer and banking worlds.
“If you look back between 1995 and 2003, the number of checks processed by banks has gone down by 26 percent,” he said. But the big number is debit card usage. During the same eight-year period, the number of debit card transactions, which deduct money immediately from a customer’s checking account when the card is used, has gone up by 1,000 percent.
There are still two checks processed for every debit card transaction in the United States, Jones said, but the balance is shifting.
Despite concerns about information security – perhaps heightened by the recent TJX Cos. data breach, Jones noted – more than 15 billion debit card transactions went through in 2003. “That tells you that people have voted,” he said.
There’s the added phenomenon of people using debit cards over cash for “micro-purchases” such as coffee, he said, predicting that eventually debit-card use will trump both checks and cash as preferred payment methods.
In Europe, the cell phone industry is cashing in on consumers’ increased reliance on debit cards too, Jones said. With their account information programmed into their cell phones, he said, retail customers are now able to swipe their cell phones in front of a debit machine and have a transaction occur.
Bringing in new customers is a major goal of new banking products, but Danversbank also introduced Free Rewards Checking to entice existing customers toward electronic banking, Vail said. And there are many reasons for that decision.
The bank saves on postage and printing when it e-mails a monthly statement, she said, and saves processing fees when customers use online bill-paying – something they’re more likely to do if they check their account statement regularly online – instead of checks.
Research also has shown that customers who use auto-deposit or auto-debit features are more likely to stay with the bank. And the bank gets an average of 44 cents for every debit transaction processed.
“That’s why we can pay the high interest rate. We’re offsetting it,” Vail explained.
Free Rewards Checking also was relatively easy to set up, as it was developed by an outside vendor, BancVue, which sold Danversbank the product and accompanying software.
Dodge said Salem Five’s cash-back program is unique in that other banks’ debit-rewards programs require a customer to call in to get money back or give “points” toward gifts instead of cash.
Citizens Bank’s 6-month-old debit-rewards program allows customers to earn points for every dollar spent in a signature-based debit transaction. The points can be redeemed toward gift certificates.
Bank of America’s “Keep the Change” program rounds up, to the nearest dollar, all purchases made with the bank’s Visa Check card. It transfers the difference from the customer’s checking to savings accounts and matches the amount by up to $250 annually.
In the end, banks that marry the trend of increased debit-card use with attempts to attract new depositors can’t lose, Jones said.
“I think that banks like Danversbank and SalemFive have seen that trend and want to encourage it,” he said. “Banks are better off if people use debit cards. And [some] are smart enough to marry that trend with a dramatic need, which is deposits.”
