Question

United Jersey Bank offers customers, who have a combined balance of $3000 or more in a United Jersey Checking Account and Preferred Money Market Account, a service called United Jersey Preferred Banking. This service is designed to make banking more convenient and profitable for customers. United Jersey Preferred Banking eliminates monthly maintenance fees, provides unlimited free transactions at ATMs, preferred rates on personal loans, higher interest rates on savings with higher balances and a consolidated monthly statement. United Jersey Bank does not offer United Jersey Preferred banking to customers with a combined balance of less than $3000 in a United Jersey Checking Account and Preferred Money Market Account since these customers are:

A. In the wrong segment
B. Not divisible
C. Not profitable in the long run
D. Known as difficult customers
E. None of the above

Answer 1

United Jersey Bank does not offer United Jersey Preferred Banking to customers with a combined balance of less than $3000 because they are considered not profitable in the long run (Choice C). Such profitability considerations are essential in the competitive banking industry that has experienced consolidation and a shift towards credit unions.

Step-by-step explanation:

United Jersey Bank offers a service called United Jersey Preferred Banking for customers with a combined balance of $3000 or more in a United Jersey Checking Account and Preferred Money Market Account. This service provides several benefits aimed at making banking more convenient and profitable, including the elimination of monthly maintenance fees, unlimited free transactions at ATMs, preferred personal loan rates, higher interest rates for savings with higher balances, and a consolidated monthly statement. However, United Jersey Bank does not extend this service to customers with a combined balance of less than $3000 because these customers are considered not profitable in the long run (Choice C). The profitability of such services is vital for banks in maintaining competitiveness and ensuring sustainable business operations. This is even more critical in the context of an industry that has seen significant consolidation, with the number of banks decreasing from 7,085 in 2008 to 4,374 commercial banks by 2020, and many customers moving their money to credit unions—as evident by the Move Your Money Project.