Oct 08, 2018

View from the Trenches: The Checking Account Decision-Making Process (Without A Parent)

Thanks to NGPF Fellow Charles Kafoglis for sharing this recent checking activity he did with this students which yielded some surprising results.

Here's the view from the trenches: 

Each year, in my unit "Bank On It", I use the NGPF Activity to have students describe and compare checking accounts.  They must compare checking accounts from three different types of banks: national/regional/local, credit unions, and online banks.  One of the three banks must be their current bank.  Their goal is to research and ultimately recommend the best account for them as a college graduate at 23.  

Each year, if is revealed that their current accounts have been influenced (aka selected) by their parent resulting in lots of national banks (Wells Fargo, Chase and Bank of America) plus a collection of credit union accounts.  Except for an occasional USAA online account, online banks are not in the mix.  Then the research begins.  For the past 4 semesters the results have been consistent - most students stick with their current accounts or switch to a local credit union.  These decisions are based on fees, service, and rate of return.
 
But this semester was different.  For the first time, the majority of the 33 students switched to an online bank.  Their were attracted by the trend toward eliminating almost all fees.   The online checking account that was most favored was Discover Cashback Debit.  They loved the cash back on debit spending which in our analysis greatly exceeded any interest they would earn at today's low rates.   
 
The implications of this small sample are stark and raise many questions:
  • What is the future of brick and mortar banks in the years ahead for retail customers?   
  • Will the big banks create companion products to compete that address their fee disadvantage? 
  • How many online banks can actually survive as more and more enter the market?
A footnote:  a student found an online bank from Oklahoma called Redneck Bank.  The website was such a hoot I took the next step and promised to open an account just to get the Redneck Debit Card.   This had the added benefit of signing up for an account online on the Smartboard so they could see how one actually gets through the signup process for an account.  This teaching moment then switched  to another teaching moment, when my application was declined on the spot.  We called Redneck to see what caused the real time rejection, and to the students surprise, an actually person (Megan) answered the 1-800 call.  No call menu...just a person.  Megan told me I was rejected in front of my amused high school senior class because of my Equifax Credit Freeze.  So we careened into a discussion of credit reporting services and the Equifax breach from last year.   
 
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Looking for more resources for your checking unit? Check out NGPF's Checking Unit Page and don't miss NGPF's Online Banking Simulation. 

 

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