The impact of maintenance fees on students' willingness to maintain bank accounts and establish credit profile

Abstract

The purpose of this article is two-fold: to investigate how recurring maintenance fees levied on students' accounts impact on university students' willingness to maintain bank accounts and therefore begin creating the necessary credit profiles. Credit profiles provide financial history that is useful for banks and other lenders to evaluate clients' credit worthiness. Many students in South African universities are ignorant of this requirement and usually make choices detrimental to their accessing current and future financial products. The banks' service quality and students' expectations need to be harmonized at some point. The study was exploratory in nature, using expressive statements on banking costs to expose common causes of financial burden, the best and worst case scenarios of utilizing banking products including benefit accrual from their use. Pre-intervention data was collected using questionnaires N=60 conveniently sampled financial management students. The post-intervention data was collected from the same students N=55 using similar questionnaires where five students did not show up. The study also assessed financial management tutorial influence on students' decision making after being exposed to banking market demands and their costs. SPSS was used to analyze data collected. Cheaper once-off cardless services were found to be popular with students receiving money, citing its reasonableness and depositor charger rather than recipient shouldering transaction costs. Students confirmed their satisfaction with saving costly recurring bank account maintenance fees, earning 0% interest on credit balances. Bank account holders increased in post-intervention compared to pre-tutorial with better understanding of client's profile value for accessing credit. Other students remained reluctant to maintain bank accounts despite future economic benefits. Bank account maintenance fees discourage students from maintaining bank accounts. Maintenance fees may aid banks user cost recovery but losing clients to competing cheap cardless products may be more costly. The study contributes to relationship management in banking sector. Research debate focused on bank selection criteria based on established key quality factors and service. Little scholarly investigation exists on reasons for annulling bank accounts, replaced with once-off cardless services that is gaining popularity with university students over maintaining bank accounts. Highlighting what is critical to students, the paper may influence banks policies and developers to design innovative products suitable for university students market. Affordability and incentives are key attraction points for clients, mainly university students operating with limited resources. Loyalty prospects can surpass immediate recovery derived from maintenance fees.