CHICAGO (2/25/13)--Pesky fees--the kind that penalize members for inactivity or using paper statements as opposed to fees for bounced checks--have been linked to an erosion of loyalty among consumers of financial institutions.
Fees were the common theme in comments from "detractors" of low performing institutions on the Satmetrix Net Promoter Score (NPS), a program offered credit unions by Chicago-based credit union service organization (CUSO) Member Loyalty Group. The score examined more than one million survey responses for the CUSO's 2011 relationship survey focusing on overall member relationship versus specific transactions.
The survey defines "pesky fees" as fees such as those charged for inactivity, paper statements or picking one's own personal identification number. Comments expressing frustration over pesky fees were three times more common in bottom-performing institutions when compared with loyalty leaders.
"The irritation members feel when they discover 'pesky fees' can erode member loyalty and even muddle the credit union difference," said Michelle Bloedorn, CEO of the Chicago-based Member Loyalty Group. "Members understand that fees have to be charged when they overdraft their checking account, but fees that are not based on member action or seem to be punitive in nature are extremely frustrating," she added.
NPS found that the actual fee income per member at top NPS performers is nearly identical to that of loyalty laggards. However, the NPS score is significantly higher in credit unions without negative member comments regarding fees. The score is based on the premise that all customers fall into three categories: promoters, passives, and detractors. To get the score, subtract the detractors from the promoters.
Consumers in the 35-54 age range were the group most particularly frustrated by pesky fees. Member comments, especially from older members, also showed they clearly understand the credit union difference and take pride in being a member of an organization that offers high quality service and does not charge as many fees as the big banks, said Member Loyalty Group.
"While other factors are likely at play in both the top and bottom performers, the 'pesky fees' are one common theme that credit unions should be aware of and may be able to avoid," said the CUSO.
The effect of fees on loyalty was a significant factor for credit union growth in 2011, when millions of people fed up with big bank fees switched to credit unions during the months surrounding Bank Transfer Day. That movement was triggered by proposed debit card fees at big banks such as Bank of America. The Credit Union National Association estimates that more than 2.2 million consumers opened accounts at credit unions in the 12 months that ended June 20, 2012.