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How Do Banks Get Your Business?

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Banks spend more than 25 times as much money on marketing as governments, school districts and other organizations do on financial education, according to estimates from the Consumer Financial Protection Bureau.

More specifically, Americans are inundated with $17 billion of marketing messages but only $670 million is being spent on helping them understand it. That’s $54 of sales efforts and $2 of education per person per year, the report says.

The CFPB study attempted to take a one-year snapshot of spending in these categories. It breaks down the marketing side into awareness advertising that reaches consumers through traditional outlets like television and print, and direct marketing, including Internet ads and mailings designed to persuade consumers to make a purchase. Of the $5.5 billion spent on awareness advertising, most went toward promoting credit- and loan-related products. Credit cards were the most common subject of awareness ads, taking up $2.1 billion of the category.

It makes sense that financial service providers would spend more money ($12 billion) on direct marketing, as its goal is to produce sales. Anyone who browses the Internet sees the result of such spending: 44% of that $12 billion paid for online display ads and search. Direct mailings took up 22% of the marketing expenses.

When it comes to the comparatively weak spending on education, nonprofit organizations do the heavy lifting. Such groups spent $472 million on financial education, and the federal government was a distant second at $130 million. Nonprofits, for the purpose of this study, were categorized as private organizations on the state or national level, trade associations and coalitions, community-based organizations and faith-based organizations.

The educational spending figure excludes the amount consumers spent on educating themselves, whether by reading or hiring financial planners. It also excludes the salaries of teachers whose courses include financial education.

But those exclusions don’t make up for the extreme disparity between education and marketing. Based on the difference, it would seem consumers are much more likely to base financial decisions on information they’ve absorbed by way of advertising than on educational material. It should be noted that the study doesn’t include spending related to teaching about or marketing investments, insurance, retirement planning or student loans.

Given the education gap, it’s up to consumers to learn the ins and outs of credit. Better financial decisions tend to be a byproduct of thorough research and awareness of one’s personal credit standing, which is easy to gauge by staying on top of credit reports, credit scores and account statements. The free Credit.com Credit Report Card is a simple way for consumers to learn about and understand their financial behaviors, as it breaks down the components of one’s credit scores and highlights areas for improvement.

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