Don’t be so loyal, consumer authorities tell bank customers

Consumer competition authority challenges private customers to play hardball and switch banks

Like stealing candy from a baby. That’s how easy it is for banks to squeeze extra money out of complacent private customers, according to competition and consumer authorities. The experts say Danes need to get smart, start asking questions, and be willing to take their banking business elsewhere.

“We want to tell consumers that it’s good for them and their wallets if they study the market a little and switch banks. It’s about getting consumers to be more active – for their own good, but also for the competition,” Hanne Kristensen, the vice president of the competition and consumer affairs association Konkurrence og Forbrugerstyrelsen, told Berlingske newspaper.

In a recent study, the consumer magazine Samvirke found that just 35 percent of private bank customers negotiate lower interest rates and fees with their banks. Meanwhile, just 22 percent compare the interest rates offered by other banks before borrowing money. Moreover, only 30 percent of Danes have changed their banks in the last six years, according to Samvirke.

That is far too few according to John Norden, who helped start, a website where consumers can compare the banks’ products, rates and fees.

“Bank charges have gone up by 30 to 35 percent in the last year. The interest rate margin has grown, and that means many people are either paying too much for their loans or getting too little for their deposits. So, they can most definitely get something out of switching banks,” Norden said.

He encourages consumers to compare rates and, if necessary, switch banks as often as once every year.

But economist Morten Bruun Pedersen from the consumer council Forbrugerrådet said people often do not change banks, even if they know they are being overcharged.

“Psychologically, it’s hard to switch banks. And then there are tons of practical things with bill paying and account numbers that make switching difficult,” he said.

Forbrugerrådet has a proposal for how to make switching banks easier on consumers.

“We would like to introduce bank account portability, just like you have when you switch telephone providers. That way, the new bank could acquire your existing bank account numbers, so that you wouldn’t have to change your payment arrangements.”