More customers leaving big banks

@CNNMoney February 27, 2012: 1:00 PM ET

NEW YORK (CNNMoney) -- New fees and poor customer service have sparked an exodus among big bank customers, many of whom switched to smaller institutions last year.

The defection rate for large, regional and midsize banks averaged between 10% and 11.3% of customers last year, according to a J.D. Power and Associates' survey of more than 5,000 customers who shopped for a new bank or account over the past 12 months. In 2010, the average defection rates ranged from 7.4% to 9.8%.

Meanwhile, small banks and credit unions lost only 0.9% of their customers on average last year -- a significant decline from the 8.8% defection rate they saw in 2010.

These smaller institutions were also able to attract many of the customers who left the big banks. Over the course of last year, 10.3% of customers who shopped for a new bank landed at these smaller institutions -- up from 8.1% in the prior year.

New and higher bank fees at the nation's biggest banks led many customers to switch to smaller institutions over the past year, with about a third of customers at big banks reporting fees as the reason for looking elsewhere.

"When banks announce the implementation of new fees, public reaction can be quite volatile and result in customers voting with their feet," said Michael Beird, director of the banking services practice at J.D. Power and Associates.

Community banks team up to fight the megabanks

Checking account fees have been on the rise at the nation's biggest banks over the past year, and customer revolt against big banks really began to mount after Bank of America (BAC, Fortune 500) proposed a monthly fee for debit card use last fall.

Even though the bank later backtracked on its decision, the announcement led to a nationwide, social media-fueled "Bank Transfer Day", during which customers encouraged each other to dump their big banks for community banks and credit unions.

The report also found that many customers were already unhappy with the customer service at big banks, so when fees were announced or raised, there was even more of an incentive to switch institutions.

'I dumped my bank!'

"Service experiences that fall below customer expectations are a powerful influencer that primes customers for switching once a subsequent event gives them a final reason to defect," said Beird.

More than half of all customers who said fees were the main reason for switching banks also said they had received poor customer service at their prior bank, he said. To top of page

Help! We need a makeover
Young dad, $15,000 in credit card debt
Readers' Choice

Carlos Rodriguez is trying to rid himself of $15,000 in credit card debt, while paying his mortgage and saving for his son's college education.

$400,000 portfolio, too many holdings
Readers' Choice

Susan Carson and Laura DeLallo make $225,000 and have half a million in retirement savings, but their sprawling portfolios is proving hard to manage.

Overnight Avg Rate Latest Change Last Week
30 yr fixed3.96%3.94%
15 yr fixed3.08%3.03%
5/1 ARM3.33%3.33%
30 yr refi4.04%4.02%
15 yr refi3.16%3.09%
Rate data provided
by Bankrate.com
View rates in your area
 
Find personalized rates:
CNNMoney Sponsors

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.