In recent weeks, there has been a good deal of coverage in business media on how banks plan to make up for the loss of debit interchange income, assuming the Durbin Amendment is passed. Much of the discussion has centered on rolling back on debit rewards, eliminating free checking, and increasing ATM fees.
However, it appears that these changes will not apply to student checking accounts. For example, TD Bank recently introduced a new range of six checking accounts, only one of which–TD Student Checking–does not carry a monthly fee. A perusal of leading bank websites shows that most offer a dedicated student account with no monthly fee and no minimum balance requirement. The checking account is the most important product in building a relationship with customers, so expect no-fee student checking to continue.
In addition, banks will seek to build on the checking account relationships with:
- Student banking bundles
- Student credit cards
- Special offers and benefits, such as no fees for using other banks’ ATMs, discounts on fee-based products, higher rates on saving accounts, or lower APRs on lending products
- Range of virtual service options (Internet banking, mobile banking, social media)
- Financial advice and planning tools
The combination of these products and services is designed to ensure retention of the customer relationship during that crucial period when students graduate and move on to a new life stage.
Earlier this week, PNC introduced three new rewards credit cards, with bonus rewards tiers for cardholders who also have specific PNC checking accounts. This relationship rewards approach builds on PNC’s existing PNC Points program, which enables customers to combine points earned on credit card and debit card spending, as well as on various banking activities. Two of the three new cards are also in the PNC Points program; the other offers a cash rebate.
While Citi’s ThankYou Network is frequently cited as the archetypal relationship rewards program, PNC’s bonus rewards concept has more in common with the Chase Exclusives program. Both programs provide bonus earnings for their checking account customers, and underscore the primacy of the checking account as the key relationship product for banks. It is also notable that all three banks have built their relationship rewards programs using a card-based points architecture.
With the Federal Reserve’s proposed cap on debit card interchange, many leading banks have announced the discontinuation of rewards on debit card spending. From a relationship perspective, this means that some banks are refocusing attention on the checking account itself, rather than the plastic attached to it. In the case of PNC, it is telling that the level of bonus reward is based on the checking product owned, each with different minimum balance requirements (e.g., 50% bonus with PNC Performance Checking Account; 75% bonus with PNC Performance Select Checking Account).