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Your bank might be paying a nice amount of interest. But read on to see why switching to another institution could still make sense.
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Banking is one of those things you tend to get used to. If you’ve had your money at the same bank for many years, it can be difficult to push yourself to make a switch. This especially holds true if your bank happens to be paying a pretty good interest rate on your savings account right now.
But even if you’re happy with the rate you’re getting, switching to a new bank could still work to your benefit. Here are some of the reasons why a change could make sense.
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1. You can snag a higher interest rate elsewhere
Maybe your bank is paying 3.75% on savings accounts right now. But if there’s another bank offering 4.25% on your money, moving over could mean earning a lot more interest.
Let’s say you have $20,000 in savings. An extra 0.5% of interest means walking away with an additional $100 in the course of a year — all for basically doing nothing. So you shouldn’t necessarily let your familiarity with your current bank stop you from earning more money at another.
2. You can sign up for a CD whose early cash out penalties aren’t as harsh
CD rates tend to be higher than savings account rates because you’re required to commit to keeping your money in the bank for a preset period of time. That could be six months, 12 months, two years, or longer.
When it comes to the principal amount of money you put into a CD, there’s no risk in opening one provided your deposit doesn’t exceed $250,000 and your bank is FDIC insured. However, you do run the risk that you might have to cash out your CD before it comes due. Go that route, and you’ll likely face a penalty, the extent of which will depend on your bank.
Capital One, for example, charges a penalty of three months of interest for cashing out a CD early when its term is 12 months or less. And your bank might have a similar policy. But if you can find a bank that offers a smaller penalty for cashing out a CD early, then it could pay to move your money over.
3. You’re hoping for better customer service
Whether you reach out for help from your bank occasionally or frequently, it should be a good experience from start to finish. If your bank doesn’t offer such great customer service, then it doesn’t matter that it’s paying a good interest rate on your savings. You still deserve to be able to walk in or pick up the phone and have an efficient, pleasant, helpful interaction with the person tasked with assisting you. Period.
Moving from one bank to another can be a jarring experience if you’ve banked at the same institution for many years. But if these situations apply to you, it could pay to make a change. And remember, you’re apt to get used to that change in time, even if it feels strange to bank elsewhere initially.
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The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Maurie Backman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
