Decades ago, when banks wanted to sign up customers, they handed out free toasters. While toasters are long since passé, banks are still offering promotional giveaways—only this time they’re likely to be Apple iPods and gift cards.

Experts say the revival of such giveaways reflects a more competitive banking market, particularly for consumer deposits. "They’re another way to cut through the clutter, another way to get customers to pick you," says Gordon Goetzmann, managing vice president for New York-based First Manhattan Consulting Group.

Cleveland-based KeyCorp currently offers an iPod Nano (the smallest of Apple’s iPod line) to anyone who opens a checking account plus signs up for direct deposit or a credit card. It offers an iPod Shuffle to students who apply for a checking account, credit card, debit card and sign up for online bill payment.


Cindy Spitz, a spokeswoman for Key, says both campaigns are going well and the student giveaway has "more than doubled" the number of student accounts the bank usually adds at this time of year.

Citigroup Inc. began offering the "Mini" version of the ubiquitous audio player in 2004 to customers who opened a checking account with a deposit of $2,500 or more and paid at least two bills online per month for a year. The following year, the New York-based bank began giving away the less-expensive iPod Shuffle instead.

New York-based JPMorgan Chase & Co. has also given away iPod Shuffles during promotions, in the summer of 2005 and most recently the first quarter of 2006. The offer was to customers who opened a checking account with $500, signed up for direct deposit and agreed to pay at least two bills per month online for six months.

Spokesperson Calmetta Coleman says that the iPod offer was popular with customers, but Chase has lately switched to gift cards as its primary promotional offer. Cards are a better fit with the bank’s "your choice, your Chase" marketing message, Coleman says.

"The market is really competitive right now," Coleman adds. "We wanted to thank customers for using us, and [have] another way to get people in the door."

Chase offers customers a choice of cards from Target, Best Buy and Home Depot. The cards typically carry a value of $15 or $25, depending on the type of account being opened.

As attractive as these offers may be, they do come with strings attached. Citi customers who take the iPod but fail to keep the terms of the account agreement must pay for the device. KeyCorp charges a $25 fee to customers who close accounts or fail to pay bills online during the six months they are typically committed.

Robin Foote, managing director for New York-based Novantas, says banks use such deals to build traffic and deeper ties by making customers commit for several months, particularly to 'sticky' applications like online bill payment and direct deposit. Promotional giveaways also help banks differentiate themselves in a commoditized market, she says.

"Banks are not terribly distinctive from one another," Foote says. "The tactical fallback is promotions."

Foote says that the effectiveness of such programs can vary widely, based on the cost of the giveaway items and how the bank "fences" its offering, or structures it to appeal to certain desirable customer segments.