Banking on pride

Balkanized banks Bankers are usually eager to cast a wide customer net, but the Internet is allowing for niche marketing. Online "affinity banks"-some independent, others underwritten by traditional bricks-and-mortar institutions-are offering customers the chance to trumpet self-identity with their choice of financial institution. Now citizen subgroups such as women, homosexuals, and even long-haul truckers have banks built especially for them, according to Massachusetts-based Meridian Research, a financial services research group. Affinity banks let consumers "show pride and support groups they're affiliated with," Meridien reports: "For some people, that's more important than the bank's fees or interest rates." The idea is not new: Since the early 1990s, credit card companies have offered affinity products such as sports team logo credit cards. Credit unions also operate on an affinity premise, courting customers who share common traits, usually employment-related. Now G&L Internet Bank gathers clientele based on sexual behavior. PNC Bank, another online institution, recently signed an exclusive agreement to sell its products on i-Village.com, a women-centric website. Ibankunited.com is marketed to Chinese-Americans. Rather than offering services to the general public, these banks form relationships with organizations and their constituents, sometimes offering those groups kickbacks for new accounts opened. Though such a targeted approach helped banks like G&L and PNV-the online bank for long-haul truckers-get off the ground quickly, their very narrowness may be their undoing. PNV recently declared Chapter 11 bankruptcy and G&L-the only affinity bank to market itself nationally-has yet to report a profit. Meanwhile, big-gun national and regional banks are poised to steal affinity banks' only thunder: Using customer database technology, they are increasingly able to tailor relationships with individual clients, without chiseling away those who don't fit. Money is a terrible thing to waste When families consider how best to pay for college, interest-bearing loans and home-equity credit lines often pop first to mind. And though government grants also are an option, many families don't qualify. But other college-financing strategies can help families avoid debt-and reduce overall costs by eliminating interest payments. Saving a little toward college from the time children are young is, of course, one way families can pay their own way for higher education. But the press of current expenses can make such long-range saving difficult. Still, a hard-nosed savings plan implemented a year or two ahead of a student's freshman semester can help families get far enough ahead of the college-cost curve to defray at least part of the bill for the four-year ride, thus reducing reliance on loans and credit lines. Many parents can derive extra discretionary cash for such a plan through controlling expenditures: driving a paid-for used car, for example, instead of making payments on a newer one. About half of parents of high-school juniors and seniors, though, haven't begun saving for college, according to William A. Hastings, president and CEO of Swansea, Mass.-based Academic Management Services (AMS), an education lender. For those families it's still not too late to avoid debt: Some colleges allow students to pay their tuition monthly. Other institutions outsource payment plans through companies that offer "tuition management." At least six firms, including AMS, SMART Tuition Management Services in New Jersey, and Lincoln, Neb.-based FACTS Tuition Management, arrange monthly tuition payments for students or their families, and forward them to member educational institutions. Such firms earn money by charging an annual enrollment fee, usually about $50. "By budgeting even a portion of tuition over 10 interest-free payments," Mr. Hastings said, "families can avoid interest and save thousands of dollars in the long run." "You've got bills" When tech-geeks developed "electronic bill payment and presentment," it was corporate-not consumer-enjoyment they had in mind. By presenting consumers' bills on the Internet, companies could save both manpower and money. But now many consumers also seem ready to enjoy the new way to pay-and chuck old-fashioned billing by mail while they're at it. A survey by Bank of America of its 3 million online banking customers found that 8 in 10 wanted to receive their telephone, cable, water, garbage and electric bills electronically. More than two-thirds said they'd also like to stop receiving traditional paper bills. American businesses would be happy to oblige: Companies spend about $18 billion a year processing payments the paper way; universal electronic billing would cut that cost by up to half. The global telecom advisory firm Analysys predicts that businesses ultimately will find the cost-saving benefits of electronic billing irresistible. Already, AT&T is plying its long-distance customers with anti-paper perks: Customers who forgo by-mail bills in favor of online ones receive a $25 Amazon.com gift certificate, and also save a buck a month on their phone bills.