Tiny Md. bank makes move for bigness It targets customers fed up with high fees of banking giants

Free checking, good service

Sandy Spring of Olney has only 17 branches, $818 million in assets

Banking

June 30, 1996|By Bill Atkinson | Bill Atkinson,SUN STAFF

Last week, nearly 200 people opened checking accounts at Sandy Spring National Bank of Maryland, more than twice the average. And its operators were flooded with calls from other people interested in switching to the bank.

It's not surprising. At a time when many bank customers are sick of incessant banking fees, Sandy Spring is offering a truck load of free services with its new checking account, called "Bonus Gold."

There are other banks offering some fee-free services. Provident Bank and Crestar Bank, for instance, offer a basic free checking product, and First Mariner Bank plans to introduce its own version with a number of benefits to customers. But no one seems to be offering the freebies like Sandy Spring National.

"We think it is the best [deal] around," said Hunter R. Hollar, president and chief executive of the $818.6 million-asset bank, which is based in Olney in Montgomery County.

It may be good for customers, but Hollar also hopes it'll be good for the bank.

Sandy Spring National is offering Bonus Gold because it wants as many new customers as possible, and once it gets them through the door, the bank has a much better chance at selling them other products and services. But it's also a bank that is growing, and it wants to become a household name in the state.

The offering is an eye-opener for an account that doesn't pay interest. Usually, perks come with accounts that pay interest, and they require customers to carry higher balances. But Bonus Gold includes:

Free checking until the year 2000 with no minimum balance.

No monthly fee to maintain an account.

Free, unlimited ATM use at any one of Sandy Spring National's 18 machines, and four free transactions each month at other banks' ATM machines before being charged.

A $5 discount on safe deposit box rentals.

A $200 reduction in closing costs on a first mortgage taken out at Sandy Spring National.

The move is hardly in step with what's been going on in the banking industry, which has seen more fees and higher fees for services. This month, for example, the Supreme Court unanimously voted to allow credit card issuers to ignore state laws that limit the amount of money they charge tardy consumers.

"Consumers are getting gouged by banks, especially by the big banks," said Dan Pontious, executive director of the Maryland Public Interest Research Group, a consumer and environmental advocacy group. "People just feel like it's highway robbery."

Fees sometimes go unnoticed by the customer because they are smaller than other monthly payments, but they are money-makers for banks.

A recent study by Washington Consumers' Checkbook magazine showed that banks charge monthly maintenance fees of up to $15 on accounts that pay 2 percent in interest. Some also charge $1.50 for every ATM transaction conducted at another bank; $25 for a stop payment; and up to $28 for bounced checks.

Commercial banks made $2 billion alone on ATM transactions in 1995, Pontious said. But that's a small portion of what they earn in fees from their customers each year.

Banks took in $16 billion last year on fees related to such services as bounced checks, monthly maintenance and ATM transactions, and earned a record $48.8 billion for the year, according to the Federal Deposit Insurance Corp.

When many banks were failing and the industry was struggling with real estate problems in 1990, the industry earned $16 billion and $11 billion was attributed to fees.

"Banks are counting on the fact that people will just pay these fees," Pontious said. "It is hard to close out an account and start up a new one."

That's why Sandy Spring National has come out with a product that offers so many services free. It knows that people don't like to move their money around, but it also knows the importance of getting checking accounts.

Checking accounts are big business and an important product to the banking industry even though the average balance at most banks is $3,159 for non-interest bearing accounts, according to the American Bankers Association.

They are critical because consumers view the institution where they have their checking account as their main bank, said Michelle Bradley, vice president of marketing with Laurel-based Citizens Bancorp.

"You build a relationship from there," she said.

That means selling the customer credit cards, home and auto loans and a line of credit. In addition, once a customer opens a checking account at a bank, they are usually reluctant to leave because it's a headache transferring accounts from one bank to another.

"The competition is really customer inertia," Hollar said. "The difficult part of selling checking accounts is that there is a perception that changing my checking account is a huge hassle."

But competition is keen, not only from other banks, but the mutual fund industry, which is siphoning deposits.

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