What'll ya have with that cooler, wheels or thermos?

Whatever you choose, it can be yours--for free--by opening a checking account with one of two competing area banks. Whitney has the cooler on wheels and Hibernia is giving away a thermos along with a shiny red ice chest.

If iced-down beverages aren't your cup of tea, don't worry. Almost every full-service bank in town is offering some sort of freebie. Anxious to land new retail accounts, and keep existing customers happy, local bankers are baiting the hook with an assortment of goodies-everything from gifts to cash grabs to free checking.

After spending much of the 1990s jacking up fees and generally making life difficult for those with basic checking accounts, banks are slashing service charges, increasing return rates and expanding their hours.

Explaining the about-face is simple: the lucrative sojourns into investment banking, venture capital and other lush activities sparked by the bull stock market have soured. Today, with Wall Street in turmoil and interest rates low, banks are focusing on the reliable profits churned out by garden-variety consumer accounts.

Call it a financial convergence, but consumers are just as anxious to do business with banks. Hammered by declines in the stock market over the last two years, consumers are increasingly moving money from investments to federally insured deposits.

Deposit growth across the nation has outpaced loan growth in five consecutive quarters, beginning with the fourth quarter of 2000, according to the Federal Deposit Insurance Corp. In Louisiana, bank deposits grew by more than $2 billion, or 4 percent, from 2000 to 2001.

"Consumers are the new battleground, and banks are looking for any edge to get those deposits," said Woody Briggs, a banking analyst with Chaffe & Associates in New Orleans. "Their goal is to get you in the door with a free gift and start selling."

Through the doors

New customers mean new opportunities for banks to pitch credit cards, mortgage loans, investment services and other products. It's a strategy known as cross-selling or "relationship banking."

"Banks have wised up a bit and learned from mistakes of the past," said Emmett Vollenweider, a senior Vice president and retail market manager for Bank One Louisiana. "Stronger relationships with our customers enhance profitability. Getting them to open that checking account opens the door."

Though area bankers decline to provide hard numbers, they say new customers who (show up to open a checking account typically leave with four bank products, including overdraft protection, a credit card and a home-equity loan.

"The consumer piece of business has become a very profitable piece of business for banking," said Stephen Lousteau, chairman of the Baton Rouge region for Hibernia National Bank.

Moreover, technology advances have enhanced profitability because services such as automated teller machines, online banking and direct deposit have significantly reduced costs associated with handling checking accounts. Says Lousteau, "God knows what a checking account would cost if we didn't have those efficiencies that save us money.

Hibernia has been the area's most aggressive marketer. On the advice of a national consultant, the bank has rolled out a free checking program and is enticing new customers-and referrals from existing clients--with red ice chests. To help seal the deal, Hibernia will buy back checks that customers have bought at other banks.

Lousteau said Hibernia sold 78,000 new products to consumers in March, the first month of the program, more than double the 38,000 sold in the same month a year earlier. Those figures represent total sales within the bank, not just new checking accounts.

There's nothing new about free checking and gifts. Union Planter's Bank has offered both since entering the Baton Rouge market in 1996. "It's been successful, and I guess that's obvious because most of our major competitors are now offering some type of free checking," said Union Planter's spokeswoman Erin Tapp.

Bankrate.com, a consumer finance Web site, reports that 8.7 percent of checking accounts are free, up from 7 percent a year ago.

The trouble with 'free'

Critics point out free checking programs are flawed, saying consumers must shell out for extra services to efficiently manage their money. For example, Hibernia charges a monthly fee for debit card use and Union Planter's does the same, if the card is used to make retail purchases.

Even worse, industry analysts believe free checking programs attract customers who are more likely to bounce checks, enabling banks to profit from stiff NSF charges.

"We don't want to be in the business of collecting fees for extra services or from overdrafts," says Tommy Fonseca, regional sales manager for Whitney National Bank in Baton Rouge. "That, in part, is why we don't have a free checking program."

Instead, Whitney is testing a program locally that rewards new customers, and existing ones who refer business, with a cooler on wheels. "We're testing to see if the gift will get them in the door," said Fonseca.

Free money

AmSouth employs a similar approach to attract customers, using such gimmicks as a "money booth," a telephone booth-sized cage where the customer attempts to catch money flying around in a wind tunnel. The money booth has been used in both New Orleans and Baton Rouge.

Bank One offered a set of LSU-related bobble head dolls to new customers late last year, but its latest promotion, a partnership with Home Depot, is designed to deepen the banking relationship, according to bank executives.

The bank offers a $50 discount card' to the do-it-yourself retailer for opening a checking account. Additional discounts are earned if the customer signs up for other services. Bank One is also rewarding customers with multiple accounts by offering reduced fees and higher rates of return.

"We're not pricing at the account level,", said Vollenweider. "We're pricing at the relationship level. The goal is to reward those who do the most business with Bank One."

"Enter these banks at your own risk," laughs Briggs, the New Orleans area banking analyst. "You might only want a checking account, but you're going to get bombed with other offers.

"You can bet on it."

COPYRIGHT 2002 Louisiana Business, Inc.
COPYRIGHT 2002 Gale Group