Free checking has become commonplace in the 12 years since Washington Mutual Inc. began marketing it with much ballyhoo, so the Seattle-based thrift has come up with new incentives, to be announced today, in hopes of regaining its edge.
The incentives include free outgoing money transfers -- an offering aimed at Latinos with relatives outside the U.S., a group much courted by big banks in Southern California. Bank of America Corp., the nation's largest retail bank, began wiring funds to Mexico without charge last year for its customers.
Washington Mutual also will allow its customers to use competitors' automated teller machines without charging them (although the rival banks may impose their own charge for ATM use).
It also sought to address grumbles that it extracts a pound of flesh from all those free-checking customers by imposing some of the industry's highest fees when they overdraw their accounts. From now on, Washington Mutual will refund one such overdraft or insufficient-fund charge a year.
Improving the competitiveness of retail products was something the nation's largest S&L "had to do," said Richard X. Bove, an analyst who follows the company for Punk, Ziegel & Co. "Everyone matched them on free checking and on pretty much everything they were offering. So Washington Mutual had lost its competitive edge."
Bove said that in New York, Washington Mutual already has been offering free use of rivals' ATMs, "and they're giving away credit cards like postage stamps" after acquiring Providian Financial Corp., a large San Francisco-based credit card company, last year.
Washington Mutual's top executive said he wanted to make a competitive virtue of the necessity for change.
"I think what we're doing is again taking things to a whole new level," Kerry Killinger, Washington Mutual's chairman and chief executive, said Friday. "And I think it will cause a certain amount of disruption among our competitors."
Washington Mutual hopes to continue a surge in its retail business, which generated 60% of its profit last year, Killinger said. Mortgage lending, a major business for Washington Mutual that ran into trouble by expanding too fast earlier this decade, was the thrift's fourth-most-profitable business in 2005, behind retail, credit cards and apartment lending.
An advertising campaign promoting the new checking package will mock traditional bankers for their stodgy resistance to new ideas, Killinger said.