Magazine article American Banker

Washington Mutual Says Free Checking Program Is Starting to Pay Off

Magazine article American Banker

Washington Mutual Says Free Checking Program Is Starting to Pay Off

Article excerpt

Washington Mutual Inc. of Seattle is reporting some success with its year-old effort to market a free checking.

The account has neither monthly fees nor a minimum balance requirement.

When the promotion was started on Sept. 19 of last year, the $20 billion-asset thrift was posting a net increase of about 15,000 checking accounts per quarter, officials say.

Since then, quarterly increases have ranged from 21,300 to 26,902, pushing the total from about 370,000 to nearly 450,000.

Free checking is the primary product the thrift has been promoting in billboard, print, radio, and television advertisements in Washington, Oregon, Idaho, Utah, and Montana.

Bill Ehrlich, a Washington Mutual spokesman, said the goal is to get more customer relationships, which in turn will let it cross- sell other products. Washington Mutual also hopes to reduce funding expenses.

But R. Jay Tejera, a bank and thrift stock analyst with Dain Bosworth Inc., said that free checking accounts also generate substantial fees, mostly from bounced checks.

At least one other thrift, $5 billion-asset TCF Bank Minnesota, Minneapolis, has found that it can use no-fee checking accounts to attract lower-income customers, Mr. Tejera said. These customers bounce more checks than well-to-do customers. Since bounced-check fees normally total around $20, they can deliver substantial fee income. Mr. Tejera added that the bounced checks don't normally result in losses, since people usually pay up.

"It turns out that the average account (of the free checking variety) generates over $100 a year in fees," Mr. …

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