Banks Go Beyond Toasters
Zach Maxfield spends a lot of time talking to bank salespeople. As an associate at Second Curve Capital, a New York hedge fund that specializes in bank stocks, he regularly phones branches to gauge their sales acumen. But nothing prepared him for the woman who answered his call at a Bank of America (BAC ) branch in October. "I knew that banks were going crazy for cross-selling lately, but I didn't realize just how crazy," he says. All Maxfield wanted was the current money-market rate. But the woman pitched him a package that included two checking accounts, two savings accounts, a credit card, a debit card, and online banking.
Would you like fries with that? If you've heard that line, you're familiar with cross-selling. By offering discounted products to complement the one you're already buying, companies look to get more business. Banks have gone gaga for this approach, and to many people that's welcome news. According to research firm TowerGroup, 70% of U.S. consumers would like to have all of their accounts at one financial institution -- as opposed to the average of four they now have them spread across.
If you have at least three accounts and a combined balance of $10,000 or more, you're likely to benefit from a bank package. By aggregating accounts, you could save hundreds of dollars a year in fees and qualify for higher rates on savings and lower rates on loans. But if you don't maintain the minimum balance, watch out -- you'll get soaked on fees. Don't sign up for a package before shopping around and calculating the potential savings.
Start by figuring out which packages you qualify for. Most let you combine balances from several accounts to meet a minimum and avoid fees. For example, if you keep the total deposits in your checking, savings, certificates of deposit, and individual retirement accounts above $10,000, you qualify for Bank of America's Prima package and a waiver of $20 a month in service charges. Other packages have age requirements. For customers who are 50 or older, Wachovia (WB ) offers Crown Classic Banking, which provides benefits such as no fees on early CD withdrawals for health-related emergencies.
You may be able to sign up for a package at your current bank without changing your accounts. That's what happened when Cheryl Hansen visited the Wells Fargo (WFC ) branch in Wallingford, Wash., earlier this year. "It was a no-brainer," she says. She and her husband already had about 10 accounts at the branch, including payroll for their lamp shop. By rearranging them into a personal package and a small-business package, the branch manager reduced the Hansens' monthly service charges without changing any account numbers or transferring balances.
If your accounts are spread across several banks, do some research before uprooting your finances. Calculate the total savings you stand to gain and compare the price of each service in a package to its stand-alone price. For example, the 10 free online stock trades that go with the Wells Fargo Portfolio Management Account are worth nearly $250 when you compare them to what they would cost with an individual WellsTrade account. Make sure to check prices at other companies, too. Online brokerages such as Scottrade offer unlimited trades for $7 a piece, which may be better for heavy traders. (Wells charges $24.95 a trade after the 10 freebies run out.)
Take a similar approach when considering bonus interest rates. If one bank charges a much higher rate on car loans than another, it doesn't matter if you can knock off a quarter point because you sign up for a package. The same goes for interest on deposits. Bank of America's Prima package pays 2% annual yield on a $10,000 nine-month CD, which is better than the 1.73% on the bank's comparable stand-alone CD. But if you deposit the same amount for a full year with no withdrawals, ING Direct pays 2.75%.
Of course, that only matters if you care about getting the best CD rate. The value of a package doesn't come from any one product but from the total savings. Wells Fargo, for example, claims its Portfolio Management Account can save customers up to $871 a year, vs. the cost of setting up all the accounts separately. That would be hard to beat by assembling your own package of products from multiple institutions.
Finally, it's worth asking: Do you need all of the products in a package? Maybe not, but as long as you maintain a minimum balance, most banks won't charge for products you don't use. Moreover, you may not need all of the products today, but you might want them later. Think of them as the extras you get with your value meal.
By Justin Hibbard