'Switch kits' help depositors jump ship
By Jay MacDonald • Bankrate.com

Switch banks? Some account holders would rather gnaw off a limb than sever the ties that bind them to their financial institutions.

Today, we are bound to our banks like never before, thanks to direct deposit and automatic bill pay, sweep accounts and CDs, credit and debit cards, and expanded brokerage and insurance products, not to mention online banking.

All things considered, even staying with a bad bank sounds better than the unthinkable hassle of moving on, right?

Maybe not.

In a curious twist, the same banks that are fighting tooth and nail to retain every breathing customer have actually made it easier for depositors to jump ship, thanks to the recent introduction of "switch kits."

What's a switch kit? It's a marketing packet that many banks now use in addition to toasters and iPods to entice you to come onboard.

Switch kits help you collect the data for all of your recurring electronic deposits and withdrawals -- direct deposits, auto payments, life insurance and mortgage payments, savings plans, etc. -- on one form so your new bank can seamlessly continue those transactions for you.

Some kits even include form letters to send to the appropriate parties to switch your direct deposit, redirect your auto payments and close your previous accounts. Switch kits often are available online as well as at bank branches and through the mail.

Switching strategies
Historically, banks have been reluctant to make transparent -- much less streamline -- this backroom process for obvious reasons: They don't want you to leave -- at least not until a branch manager has had a shot at talking you out of it.

But that old-school thinking went out the window with the turn of the new century, when bank consolidation spawned hundreds of upstarts called "de novo banks," which are state banks in existence for five years or less.

The switch kit was one weapon the de novo Davids found particularly effective in challenging the new Goliaths.

"You'll most often find these in extremely competitive markets," says John Hall, spokesman for the American Bankers Association, or ABA. "It might be a new bank coming into a community and trying to gain market share or it might be a merger or acquisition where there could be some (customer) fallout they want to catch."

ABA spokeswoman Carol Kaplan views the sudden ubiquity of switch kits as a win-win for consumers and financial institutions alike. "Banks didn't used to have it all tied up in one neat little package; you would have had a separate form for every different kind of account and have to ask for every form separately," she says. "It's streamlining a process by having everything you need in one place. In a way, it's sort of strange that it took this long for us to figure this out."

Switching and 'stickiness'
Chase spokesman Tom Kelly says established brands like his quickly recognized that the same switch kits that the de novos used to poach their customers could easily be turned into a defensive retention tool.

"If somebody is moving to another state, we say look, we have branches in 16 other states. You don't have to go to all the trouble of closing an account and opening one, you can just shift your account and we can order you some checks for your new city," he says.