Has corporate greed and arrogance really gotten so bad that $10 in revenue is worth more than a decades long business relationship?

Forgive me if this sounds like a rant, it’s actually intended to spur discussion about the types of abuses being perpetrated by financial institutions in particular, and your opinions as to the short vs. long term wisdom of the types of business decisions and practices they are participating in these days.

I had been somewhat angry at the way banks had tightened up lending and credit and how all my credit cards either cancelled my accounts or jacked my interest rates through the roof (or in one case, rescinded 90% of my line of credit and jacked up the rate on the rest). This has been going on since the beginning of 2009 and it just gets worse and worse, at a time when a little short term borrowing would do wonders for me.

Even my Discover Card, which my parents opened in 1986, and transferred into my name in 1995, a card which over the past 15 years has seen on average about $3,000 in charge activity every month, which if you do the math is about half a million dollars I’ve charged on that card. And I’ve paid it off in full and on time every single month for all these years. Yet, when it became necessary for me to borrow and begin paying less than in full, accepting the 9% interest rate, which was at the time the highest rate I’d ever paid on ANYTHING, after I’d built up a balance (to keep my family afloat while I’ve been unemployed for over a year), THAT’s when they jacked my rate to 17%. And not because of my credit rating, which remains strong, but because of the “changing business environment”, all at a time when they are paying between 0% and 0.25% to the FED to borrow the money they’re lending me.

Now tell me if you think I’m missing something from a business perspective, but aside from the fact that it’s financial institutions like this one who through irresponsible lending caused the financial collapse, which drained all my ability to borrow from my open lines of credit or the equity in my home (which all evaporated), leading them to tighten up lending restrictions to the point where the small business for which I worked could not attain funding to keep the doors open, aside from that, it seems that they’re being, as the saying goes, a penny wise and a pound foolish.

From my perspective, I’m the kind of customer they should want. Even though I’d never paid them a penny in interest, over half a million in purchases on that card, just the transaction fees paid by the merchant, less any incentives they’ve given me surely add up to 10 grand or more in profit for them. And I would suspect that a) I’ll be needing a credit card for about 45 more years, and b) my wife and I will continue to make (and spend) more money as we gain more work experience and become more valuable in the market…it is after all why we have college degrees. So it seems to me that over the course of the rest of my life, I could charge (and they could earn) 10 times what they’ve gotten from me over the past 15 years.

Instead however, they charged me 8% more than I’d signed up to pay. If I keep an average balance of 10 grand for 2 years, that 8% adds up to $1,600. So, if YOU were running a business, what would make more sense to you, grabbing a quick $1,600 over the course of 2 years, or maintaining a good business relationship so you will make $100 grand over the next 40 years? And yes, not everyone is like me…not everyone is just ITCHING to get back into a position of power where I pay them off in full so I can tell them what they can do with their card and take my business elsewhere. But how many people ARE there like me? And how many of them are badmouthing these companies to anyone who will listen? How many are going to start tweeting and creating Facebook groups to decry this treatment? Can effectively doubling the interest even your best and oldest customers have to pay at a time when they are at the most vulnerable and in the most need of flexibility, really be a good long term business decision? Will they really make more money in the long run by doing this than they will lose?

So what specifically brought this up, and what I’m referring to is a situation I encountered today. I had a bank account with TCF (Twin Cities Federal) for nearly 15 years. My wife has had this same type of account for nearly 30 years. We’re talking over 4 decades combined of us having a business relationship with this bank. We had what was called “Totally Free Checking”, a service that as far back as I can remember they have offered. So, if you want to be able to use an ATM card, a debit card, and checks but don’t want to deal with a minimum balance, this has been the account for you.

Today I logged into my account and saw a $9.95 monthly service fee. Well, I simply can’t have $10 stolen from me, which is what I consider this to be, outright theft…they removed money from my account with no authorization to do so. Well, it turns out that they quietly converted everyone’s Totally Free Checking to “Convenience Checking”, which imposes a $9.95 fee for any month where you don’t have at least $100 in direct deposits (I’m unemployed, so that ain’t gonna happen) or where you don’t keep at least a $500 average daily balance (see unemployed above for explanation why this is also not feasible).

I spoke with someone at customer cuervice who explained this to me. When asked why I hadn’t been informed, I was told it was printed on January statements. I bank electronically and do not get statements. Furthermore, I log onto my account several times a month, negating any need to look at a monthly statement, as I balance my checkbook in real time. Nor did they send me any sort of email or written communication to state that there was anything on the January statement I needed to see.

Now, I’m a nice guy, and despite the fact that my keeping this account would require me to keep $500 set aside, $500 that I simply don’t have, I would have found a way, and I told them, now that I know this is the rule, I will make sure to meet the rule so as not to be charged again, but it is not acceptable to hit me with this fee at this time, and I ask as a one time professional courtesy to a long time customer in good standing to please remove this fee, and I would in exchange accept responsibility for complaince with these new rules, even though it would be difficult for me to do so in the short term.

The customer service rep said they could do nothing. So I asked to speak to a manager who has the ability to remove charges. I calmly explained to the manager my position and told her in no uncertain terms that they would be losing my business of 15 years, and my wife’s business of 30 years if they would not consider my request. She still said there was nothing she could do. I asked if there was anyone who could make a decision like this and she said, “we’re not making adjustments on this.” I once again told her very sincerly that if they insisted on keeping $9.95 they were doing so at the cost of a decades long business relationship with my family. Finally when she refused to budge an inch, I said, “well then, you’ve lost our business” and hung up on her. I called another bank that offers free checking and even gives cash back for debit card transactions, paperless statements, etc., and which offers $50 to sign up. I went to TCF, closed out my account and took the cash to the new bank, opened up an account, had my wife open up an account, got information on how to open up a savings account for my son, and applied for one of their credit cards in hopes of being able to lower my interest on some of my higher balance cards that have jacked me around.

Again, is the volume of customers times $10 a month, or 8% extra interest really greater than the fallout from pissing off your most loyal and long term customers to the point where they will take their business elsewhere, and try to convice anyone who will listen to do the same. Do they do cost benefit analysis on this, or is this just another example of how the financial industry has gotten so beligerent, so drunk with power, so greedy and arrogant that they simply can’t see the forrest for the trees? Do they habitually operate based on the idea that now is what matters and proactivity has no value to their business model, or do they honestly believe that people are going to continue to go along like blind sheep when things get better?

It seems a lot of businesses today are far more focused on attaining a steady stream of new clients than they are in maintaining long term relationships, and I’m wondering if it comes back to bite them, or if there really is some perverse logic in these business models. You can actually see the different philosophies when you compare Fluther to other Q&A sites. I feel that at Fluther, the powers that be welcome newcomers with open arms, but at the same time, they bend over backwards to keep the old timers happy by improving the things the long timers have requested be improved and not messing with what works. Other Q&A sites seem to constantly be trying to build membership while ignoring the needs of the early adopters, certainly was the case at Askville, and I’ve heard the same thing from at least 3 other sites’ refugees.

Also kind of reminds me of a big PR nightmare Netflix had when they changed their interface. I don’t currently have a Netflix membership, but the analysis I read stated that the changes they made the site seem more accessible, more user friendly, and more welcoming to new members, which may have ultimately caused more new members to enroll than old members to quit, it did away with certain functionalities relied on by the heaviest users and earliest adopters/biggest fans. And THESE are by and large the most tech savvy customers who know where and how to bitch on line to get attention. So in the long run, a lot of these new customers are going to be very temporary and say you get a million new members, and lose 100,000 old ones, that’ all well and good, except when only 50,000 of the new members stay on board after one year…by going with a short term increase in revenue, they’ve created a long term retention problem.

And that is what I’m wondering if the banks are essentially doing, if it’s something they’ve considered and determined (correctly or incorrectly) that overall it brings in more money, or if it’s really just short sightedness, living in the now and assuming that in 6 months or a year or two years when it comes time to pay the piper, you’ll have yet another scheme cooked up that will spike business. And ultimately, if the later is the case, isn’t this simply another pyramid scheme that has to blow up at some point? Is it perhaps in your opinion something they do on purpose…that is, do they purposely create bubbles like this because they know when the bubble bursts, they’ll be able to find new and creative ways to screw their customers once again? Is it the PT Barnum method of banking?

What have the banks done to you and ones you know and love over the past year or two, and what have you done or will you be doing about it? Again, sorry if this comes off as a rant at times, I’m really not viscerally angry about it anymore, I’ve had my say with the bank and done exactly what I said I was going to do, and if I were to decide to try to go viral in a PR war against any of these financial institutions, I certainly wouldn’t launch my campaign here. I simply wanted to provide the full context to illustrate even a small portion of how bad things have gotten for a customer who frankly should have banks beating down his door (and who did up until a year and a half ago). So, thanks if you’ve read this all, and what say you?