Tag Archives: personal banking

Back to Kasasa…Where does this fit into reality?

Since we launched Kasasa at First National Bank on May 9, 2011, we’ve had a great response from the community. Many of our existing clients are giving it a try and finding out this product is fantastic. We’re also seeing a good number of new faces coming through the doors at all of our branches to see what the buzz is all about.

I’ve also had a good number of friends, colleagues, and acquaintances say something like this in response to Kasasa: “Kasasa, yes, I’m still trying to figure that one out…”
Kasasa (i.e. rewards deposit accounts) does seem to fly in the face of everything a bank normally holds dear: we pay a modest rate of interest, don’t get too crazy with promotions and gimmicks, and don’t do anything that will make people wonder whether or not we really know how to take care of their money. In contrast, Kasasa pays a rate of interest most people would jump to have right now on a certificate of deposit, and we’re willing to pay it on a checking account. Kasasa is a word that sounds crazy and maybe a little gimmicky. And with the rates and the name, people may be wondering if we really know what we’re doing at First National.

The reality of the situation is that banking is changing. We are a small business, and we have to adapt to challenges just like any organization; lately it seems like we see a new challenge every time we turn around. For example, we are VERY heavily regulated, and the rules aren’t going to be loosening any time soon. Competition is also fierce as non-banks are starting to offer products we’ve offered for years. And, technology is changing the way everyone conducts business—including banking. We have more accounts and customers than we’ve ever had before at First National, but we have fewer and fewer people coming into our branches on a regular basis. As online banking, direct deposit, and smartphones become more and more prevalent, we are realizing we have to adapt in order to be successful and provide a relevant service you value.

Circling back to the original question, the reasons we offer Kasasa center around the ways we’re trying to adapt to our environment. If a customer meets three behavioral criteria on a regular basis he or she is rewarded with the high rate of interest and/or other rewards. These criteria are:

1) Debit cards – We earn money—interchange—whenever someone swipes a debit or check card. In addition, it costs us more money to process a paper check than it does to handle electronic transactions. If a client swipes her card a certain number of times (10) in a qualification cycle, then she meets this criterion.

2) estatements – It costs us money every time we generate and mail paper statements. It costs a LOT of money over time. Some estimates are that it costs more than $2/Statement mailed. In order to qualify for the account rewards, a client has to agree to receive statements electronically. The great thing is that this not only cuts costs, but also provides a couple significant benefits to our clients. First, estatements are environmentally friendly because they can be viewed online without having to be printed. Second, instead of having to wait on your statement in the mail, our estatements are accessible immediately after being generated through our online banking. In addition, the online banking site provides instant access to old statements so in essence you have an archive of statements at your fingertips.

3) The final qualification is to have one direct deposit or one automatic ACH (electronic) debit in a qualification period. One of our main goals in offering these new accounts is to develop clients who use us as their primary bank. We’d love to be the primary bank for all of our clients. Clients who have direct deposit or set up automatic ACH debits are more likely to use the account as their primary account. We’re trying to encourage that relationship.

Ultimately, in order for us to be a successful bank we need to adapt. Adapting in this case means embracing technology (debit cards/estatements/electronic transactions), cutting costs (estatements/debit cards), and growing relationships with clients so they use us as their primary bank (Direct deposit/ACH debits). This is a mutually beneficial development because we’re accomplishing our goals by offering superior products and meeting the financial needs of our local communities.
Hopefully, this helps a few of our Kasasa skeptics understand both the benefits and the reasoning behind the products we’ve introduced. It is possible for both sides to benefit in a situation like this.

I’d welcome your comments and feedback on any of this, and if you have questions about Kasasa and rewards accounts, feel free to respond.

Member FDIC Equal Housing Lender

Picking a Bank isn’t as Easy as it Used to Be

I was at Barret Graduate School of Banking in Memphis, TN, last week. It was a great week and I met some fantastic people and instructors from around the country. I was also reminded of something over and over again as I interacted in classrooms throughout the week: picking a bank isn’t as easy at is used to be.
I started working in the banking industry in 2002 as a front-line teller. My initial trainer–and many banking associates after that–drilled into me that banks were all the same in terms of products and services, and the only variable we could control was superior customer service. An individual could visit any bank and expect to have the same options regardless of a bank’s size and sophistication. Sure, size mattered at times because rates were typically more competitive at larger banks, but any community bank could attract customers with the occasional CD special or loan offer. And I have always been told that community banks could use size to their advantage by emphasizing local service from local people who have a vested interest in their community.
I think we’re starting to see a seismic shift in the way people do banking. And that shift is starting to–and will continue to–give community banks more substantial ways to differentiate themselves. Years ago, banks offered checking, savings, and time deposit accounts. They offered home loans, car loans, and small business loans. More recently they started offering ancillary services like insurance, investments, and trust services. But that’s nothing compared to how technology has contributed to the products a traditional bank can offer today: online banking, bill pay, and now mobile banking for smart phones. Person to Person payment (think PayPal) is available at many banks, and bigger banks (Chase, most prominently) are starting to scan checks with smart phones. By this time next year, the biggest banks–and companies like AT&T and Google–will offer consumers the capability to use their phone to make payments instead of the now traditional credit or debit card. Some of this technology will become standard at every bank (i.e. online banking). Other products will probably fade as they are replaced by other, better options (the paper check??). And it matters because banks, especially community banks, will have to determine what fits their vision and their community. Limited budgets and unique markets will force banks to prioritize what they offer and how they offer it. And that will mean you the consumer will have choices to make. You may not be able to walk into a bank and get the product you’ve seen advertised at a different bank. The bank you choose may be the optimal combination of service, product mix, and technology. And, scary as it sounds, you may come to rely on your banker as an expert on technology, at least as it relates to banking.
I’m curious to hear your thoughts. Have you seen any products or services in the marketplace that interest you? That may be coming soon to a bank near you?? Thanks for the feedback.

If your odds were 1 in 30 How Daring Would you Be?

There is a 1 in 30 chance that you were a victim of identity theft in 2008. In addition, there is a 1 in 10 chance that you’ve already been a victim of ID theft at some point in your life. There are some other eye-opening statistics at the bottom of this post that I borrowed from spendonlife.com. It seems like identity theft is happening more and more often to more and more people. And, the thieves appear to be getting more and more creative.

I don’t want to bog you down with piles of numbers but here a few key statistics to help lay some groundwork. There are 307 million people and 232.4 million adults in America according to the 2009 US Census. Of those, (according to Javelin Strategy and Research) 50.2 million are using a credit monitoring service to keep track of their credit history. That leaves 182.2 million US adults who are NOT monitoring their credit. And finally, 10 million people were victimized by identity theft in 2008. There are too many numbers to really break down in one blog post, but my one overriding thought is that there are too many unassuming people out there who do not appear to be adequately protected.

The assumption I take away from this is that people look at ID theft protection as just another form of (unwanted and unnecessary) insurance. I know there are people who don’t necessarily think they need insurance and assume it’s a waste of money UNTIL they have a loss. Then, they’re true believers and wouldn’t ever be caught dead without it.

At the Bank, we offer identity theft protection. There are various levels of protection that can be relatively inexpensive. However, it is one of the products almost no one ever uses. Why is this? Do people not see value in identity theft protection? Is identity theft something that people don’t see as an imminent threat? OR, is there another avenue for identity theft protection (i.e. through a homeowners insurance policy) that provides better value? Given the statistics below that demonstrate the enormous cost to victims of ID theft (both time and money), the cost of protection seems like money well spent.

I would love some feedback on this topic so feel free to comment and let me know what you think about identity theft and people’s general response to it. If you’re bored by the topic feel free to let me know that as well, or throw out some other suggestions.

Thanks for reading.

IDENTITY THEFT STATISTICS (courtesy of spendonlife.com)

Victims
• There were 10 million victims of identity theft in 2008 in the United States (Javelin Strategy and Research, 2009).
• 1 in every 10 U.S. consumers has already been victimized by identity theft (Javelin Strategy and Research, 2009).
• 1.6 million households experienced fraud not related to credit cards (i.e. their bank accounts or debit cards were compromised) (U.S. Department of Justice, 2005).
• Those households with incomes higher than $70,000 were twice as likely to experience identity theft than those with salaries under $50,000 (U.S. DOJ, 2005).
• 7% of identity theft victims had their information stolen to commit medical identity theft.

Discovery
• 38-48% discover someone has stolen their identity within three months, while 9-18% of victims don’t learn that their identity has been stolen for four or more years (Identity Theft Resource Center Aftermath Study, 2004).
• 50.2 million Americans were using a credit monitoring service as of September 2008 (Javelin Strategy and Research, 2009).
• 44% of consumers view their credit reports using AnnualCreditReport.com. One in seven consumers receive their credit report via a credit monitoring service. (Javelin Strategy and Research, 2009).

Recovery
• It can take up to 5,840 hours (the equivalent of working a full-time job for two years) to correct the damage from ID theft, depending on the severity of the case (ITRC Aftermath Study, 2004).
• The average victim spends 330 hours repairing the damage (ITRC Aftermath Study, 2004).
• It takes 26-32% of victims between 4 and 6 months to straighten out problems caused by identity theft; 11-23% of victims spend 7 months to a year resolving their cases (ITRC Aftermath Study, 2004).
• 25.9 million Americans carry identity theft insurance (as of September 2008, from Javelin Strategy and Research, 2009).
• After suffering identity theft, 46% of victims installed antivirus, anti-spyware, or a firewall on their computer. 23% switched their primary bank or credit union, and 22% switched credit card companies (Javelin Strategy and Research, 2009).
• Victims of ID theft must contact multiple agencies to resolve the fraud: 66% interact with financial institutions; 40% contact credit bureaus; 35% seek help from law enforcement; 22% deal with debt collectors; 20% work with identity theft assistant services; and 13% contact the Federal Trade Commission (Javelin Strategy and Research, 2009).

Costs
• In 2008, existing account fraud in the U.S. totaled $31 billion (Javelin Strategy and Research, 2009).
• Businesses across the world lose $221 billion a year due to identity theft (Aberdeen Group).
• On average, victims lose between $851 and $1,378 out-of-pocket trying to resolve identity theft (ITRC Aftermath Study, 2004).
• The mean cost per victim is $500 (Javelin Strategy and Research, 2009).
• 47% of victims encounter problems qualifying for a new loan (ITRC Aftermath Study, 2004).
• 70% of victims have difficulty removing negative information that resulted from identity theft from their credit reports (ITRC Aftermath Study, 2004).
• Dollar amount lost per household averaged $1,620 (U.S. DOJ, 2005).

Perpetrators
• 43% of victims knew the perpetrator (ITRC Aftermath Study, 2004).
• In cases of child identity theft, the most common perpetrator is the child’s parent (ITRC Aftermath Study, 2004).

Methods
• Stolen wallets and physical paperwork accounts for almost half (43%) of all identity theft (Javelin Strategy and Research, 2009).
• Online methods accounted for only 11% (Javelin Strategy and Research, 2009).
• 38% of ID theft victims had their debit or credit card number stolen (Javelin Strategy and Research, 2009).
• 37% of ID theft victims had their Social Security number stolen (Javelin Strategy and Research, 2009).
• 36% of ID theft victims had their name and phone number compromised (Javelin Strategy and Research, 2009).
• 24% of ID theft victims had their financial account numbers compromised (Javelin Strategy and Research, 2009).
• More than 35 million data records were compromised in corporate and government data breaches in 2008 (ITRC).
• 59% of new account fraud that occurred in 2008 involved opening up a new credit card and store-branded credit card accounts (Javelin Strategy and Research, 2009).

Poll Results: Community Banks vs. Mega Banks

So after a long posting drought—busy fall, holidays—I’m back to share the results of the reader poll I put up in October.  I was trying to gauge how people felt about community banks products vs. the competition.  I attended a fall conference that claimed people prefer “mega” banks because of the perception they offer better products and platforms.  Based on my “conclusive” poll the results say otherwise.  Of the 18 people that responded, 10 (56%) believe community banks offer the same quality products as big banks.  Three others (17%) disagreed outright and another three (17%) said they are banking locally even though they are sacrificing product quality.  So, 10 favored community banks.  Six did not.  One other voter said that regardless of product quality she will never bank with those Wall Street giants.  The final participant didn’t care, just please cash her check.  While this is a very small sample size, it’s nice to see community banks are getting the benefit of the doubt.

Joe, a “Community Banking Today” reader, also commented on the poll and reiterated that big banks offered a lot of nice features that community banks did not.  I don’t disagree that in general big banks have the resources and technology to stay ahead of the curve.  However, I’m not ready to agree that community banks can’t match their pace.  Take First National Bank for example:  A three branch, $125 million asset community bank serving three counties in Northwest Ohio.  FNB has “real time” online banking, online bill pay with text and/or email alerts (all free), online applications for home loans, deposit and loan accounts, access to investments, ID Theft Protection products, and a variety of other banking services.  AND, we will be introducing a new website later this spring, we’ll be able to open the majority of our deposit accounts online, and we’ll be introducing deposit rewards accounts. 

While we—and other community banks—may not be on the leading edge of technology, we’re not running far behind, and we tend to adopt products and services after the experimental stage so you’re not getting an untested product that may or may not be around in the long run.  This debate will be an ongoing theme this year so I look forward to keeping you updated on our progress and adding more feedback along the way.  Thanks to those of you who participated in the poll and are regular readers. 

Poll Results:

Community Banks offer the same quality of products as a “Mega” bank   10 56%
Community Banks don’t have products and services I need   3 17%
I’m sacrificing products and services at a community bank but I want to bank locally   3 17%
I don’t care about products, I’ll never bank with those Wall Street giants   1 6%
I don’t care…just cash my check   1 6%

 

FDIC

In Case You Hadn’t Noticed … your credit card terms are changing

As if there weren’t enough to keep track of in the world of personal finances, new rules regulating consumer credit cards took effect this past month.  The good news: these changes are beneficial to you, the consumer. 

The Federal Reserve is implementing these changes through the Truth in Lending Act, one of the more important regulations protecting consumers who borrow money.  The recent changes were approved in 2009 and were implemented in two different phases in February and August, 2010.  There are several notable changes, some of the most significant include:

Changes Implemented February 22, 2010:

  • All credit card companies must include a box on your statement that discloses how long it will take you to pay your entire balance if you only make the minimum monthly payment.  The idea being that if a card company is forced to admit how long it will actually take, the gory details will motivate you to get it paid off quicker.  In addition, companies must also show the monthly payment required in order to pay the entire balance in three years.
  • Your credit card company can’t raise your interest rate in the first year you have the card unless it was part of the original agreement you signed.  If they raise the rate after the first year they A) have to give you 45 days notice; B) may only charge the higher rate on new purchases; and C) must allow you to cancel the account if you don’t accept the changes.  Unfortunately, you are still responsible for the remaining card balance if you do decide to cancel.

Changes Implemented August 22, 2010:

  • In most cases, you may only be assessed a $25 fee for late payments.  Before August 22, you may have been charged up to $39 for every late payment.  And, your fee can’t be more than your minimum monthly payment so keep track of this change because it may have significant benefits if you do happen to pay late on occasion.
  • If your credit card company decides to increase your interest rate for any reason they must tell you why.  And if they increase the rate, they must also reevaluate your account in six months to see if you have earned the lower rate again.

There were other changes implemented on both these dates so if you want more information visit the Federal Reserve’s website and review their fact sheets:

                February 22

                August 22

And BEWARE, unscrupulous credit card companies are beginning to find ways around the new regulations by doing things like marketing business cards to consumers that are not subject to the new consumer protections.  As always, do your homework before getting a new card, and better yet, work with your local community banker to make sure you are getting a quality product that works for you.

FDIC 

Credit 101: The Rest of the Story…

On June 23, I posted the first half of an entry on personal credit and credit scores.  Here is the second half of that entry.

 

Never take your personal credit for granted.  Even if you pay your bills on time or don’t borrow money, it is in your best interest to keep track of your credit report to make sure you don’t get surprised by identity thieves or by incorrectly reported information.  The sooner you identify issues, the sooner they can be fixed.

Only hard inquiries affect your credit score.  There are two types of inquiries of your credit report.  Hard inquiries are credit searches completed when you apply for a loan.  Soft inquiries include things like pre-screened offers by credit card companies and inquiries by you, the consumer.  In other words, monitoring your own credit will not hurt your credit score.

Payments on a home or business loan can be significantly affected by your credit score.  For example, First National Bank of Pandora offers a 30 year fixed rate home loan.  The best posted rate today was 4.625%.  Depending on your personal credit score and several other factors, the rate may be higher than this best rate.  For the sake of comparison, imagine a $100,000 loan for 30 years at 4.625% and an identical loan at 6.00%.  Over 30 years you could save approximately $30,748 if your credit score justifies the lower rate. 

Quantity in your credit history is not as important as quality.  You do not need to have a lot of credit to build a good credit score.  Managing the credit you have—regardless of quantity—will eventually lead to good credit.

Research your options before you commit to a banking product or service.  Advertised rates and promotions at financial institutions often target customers with the highest credit scores.  If your credit score needs improvement, make sure you are getting a rate and terms you can live with.  This is where knowing and trusting your banker makes all the difference.  If you know who you’re dealing with and can trust him or her, you should be able to count on getting a quality product at a competitive and fair price.

Stay away from unfamiliar companies that over promise and advertise deals that are too good to be true.  Just like many other industries, if a deal sounds too good to be true, it probably is.

Time heals all wounds.  Even though information may remain on your credit report for a significant period of time (up to 7-10 years depending on the type of account), negative information will not permanently hurt your credit score.  The more time that passes from a negative event or late payment, the smaller the impact on your credit score.  Even a bankruptcy or a tax lien will disappear after a certain number of years.  The key is to keeping making progress and avoid repeating mistakes made in the past.

Understand that banks are not the only companies that use credit scores and your credit history to evaluate you.  Insurance companies use an insurance bureau score based on information found in your credit report to help them determine your risk as an insured.  Many employers also use credit reports and credit data to identify red flags for potential employees.

Verify that the debts you do have are showing up on your credit report.  There are companies that make loans that do not report to the credit bureaus.  In this case, even if you borrow money and make payments on time you will not get credit for it.  If you’re trying to build or rebuild your credit, make sure your credit report is accurately reflecting the progress you’re making.

Watch your due dates.  Late payments will not show up on your credit report until your account is 30 days past due.  However, if you are past due at all, a creditor may charge a late fee, increase your rate, or assess some other sort of penalty.  Make sure you understand the terms of each of your debts.

eXpect (sorry, this was the best I could do) to make loan payments if you co-sign a loan for someone.  Banks will often lend money to borrowers who may not fit normal lending guidelines as long as a qualified co-signer also agrees to be obligated on the loan.  Not only will the bank expect you to make payments if the primary borrowers falls behind, but the late payments will also show up on your credit report as a missed payment by you.

Young people should start to think about credit before they need to use it.  It is never too early to start learning about credit.  If young people understand the ins and outs of credit before they need a loan, it will be much easier to make smart decisions and build good credit once a loan becomes necessary.

Zeroes on a credit report are almost always a positive sign.  It either means you have paid a loan off or you have a $0 balance on a credit card or line of credit.  In any case, aiming for Zero is not a bad strategy in the world of managing your credit and improving your credit score.

Hopefully, these two entries on credit have been informative and at least a little entertaining.  Feel free to respond or comment with any questions you may have. 

FDIC 

Credit 101: Where to Start?

When I try to sit back and see banking from the perspective of someone who doesn’t spend every day “thinking” banking, there are very few things that seem more confusing than credit reports and credit scores.  Reading a credit report is something I do almost every day and there are still times when I’m left scratching my head.

Since I do quite a bit of reading on this topic and still have trouble finding definitive and helpful answers in one place, I’ve attempted to collect and organize them in a way that is truly informative and useful.  So, from A-Z, your alphabetized list of credit answers:

A credit score is what, exactly:  a credit score is a snapshot of your credit health and is an indication of how you manage your debt.

Basic histories of all of your debts and payments are contained within a credit report.

Credit Bureaus are the companies that gather, organize, and publish your personal credit data.  There are three main credit bureaus: Equifax, Transunion, and Experian.

Data is automatically transmitted by banks, finance companies, and other lenders to one or all of the three bureaus.  The three bureaus take the data and analyze it to create your credit history and credit score.

Every person does not have a credit score.  Credit scores measure how you handle your debt and payments, so if you do not have personal debt—i.e. credit card, car loan, home mortgage, student loans, etc.—you will not have a credit score.

FICO scores are credit bureau risk scores produced from models developed by Fair Isaac Corporation, the most well known scoring model.  Most lenders use a FICO based score when evaluating your requests for credit.

Good credit is a subjective and a moving target, but it usually means a credit score somewhere at or above 700.  Credit scores (based on the FICO model) range from 300-850 but 60% of consumers’ scores fit within a range from 650-799, according to myFICO.com.

How many different factors help determine a credit score, and how important are they?  The graph below shows the five main categories and their respective importance to your score.

Payment history: 35%, Amounts owed: 30%, Length of credit history: 15%, New credit: 10%, Types of credit used: 10%

(courtesy of myFICO.com)

Is there one quick way to improve a credit score?  Actually no, but there lots of little things you can do to improve your credit over time including paying your bills on time, keeping balances low on credit cards, resisting the urge to open new accounts just to accumulate available credit, and many more.  See here for a more comprehensive list of ideas.

Judgments, bankruptcies, collections, and tax liens all show up on credit reports and can have lasting effects on a credit score.  Even after they are paid in full or discharged, these types of occurrences may stay on a credit report for 7-10 years.

Keep a close watch on where you get your credit report and score.  There are countless companies out there advertising their “credit scores”, but they may not be using a FICO score and they may not be accurately portraying your true credit health.  Even more importantly, watch out for unscrupulous companies who are just looking to gather your personal financial information for their own purposes.  See letter ‘M’ below for a reputable resource and see the helpful table below for the name each reputable credit bureau gives to their FICO score.

Credit Reporting Agency FICO Score
Equifax BEACON® Score
Experian Experian/Fair Isaac Risk Model
TransUnion EMPIRICA®

 Lenders use credit scores and reports as part of the loan application process, but they are not the only factors taken into consideration.   The rest of your financial picture plays a major role in the evaluation of a request for credit.

Monitor your credit report and score by visiting annualcreditreport.com.  This site is government sponsored and is managed collectively by the three major bureaus to provide you free access to your report.  You are entitled to a free report from each bureau once every year.  Helpful tip #1: the report is free but you have to pay a nominal fee (approximately $5 apiece) to get your FICO score from each bureau.  Helpful tip #2: you can access all three reports at once or you can order each report separately at different times during the year so that you have more regular access to your credit history.

 Now you’ve made it to the midway point in my list.  Check back soon for the rest of the story.

FDIC