Here’s When Switching Banks Makes Sense

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Switching banks can be a big project. Learn more why you need to make a switch if you are currently paying high fees. 

Changing banks can feel like a real ordeal. When you switch your checking account, you have to change your direct deposit if you are having money put into your account automatically. You’ll also need to modify any automatic payments that come out of your bank account, whether those payments are transfers to a brokerage account or credit card payments or utility bills, gym memberships, or other expenses.

But while it can be a hassle to go through the process of changing banks, there are circumstances where it makes sense to do so. In fact, here are a few key situations when you should make a switch.

1. When your current bank is charging you fees

Banks rely heavily on fees from consumers to make hefty profits. These fees can include everything from monthly maintenance fees to overdraft fees. In fact, the Consumer Financial Protection Bureau reported that overdraft fees alone accounted for more than $15 billion in bank revenue in 2019.

Unfortunately, if you are getting hit with fees, you’re getting poorer while your bank gets richer. There’s no reason for that. You should look for a bank that won’t charge you for being a customer or having your balance drop below a certain monthly level. There are even banks that don’t charge overdraft fees, so if you find yourself facing these costs regularly, switching to one is definitely worthwhile.

2. When you can earn a better rate of return elsewhere

If you have money in a savings account, you should compare the APR your current bank is offering you with the interest rate other banks are paying. If you can earn more by moving your savings to a different account, it may be worth doing — especially if you can get a big bump in your interest rate and you have a lot of money in your savings account.

Say your current account is paying you 0.5% interest, and you could instead switch to one paying you 4%. If you had $5,000 in your savings account, you’d go from earning $25 a year in interest to $200. That extra money makes it worth the effort to switch banks.

3. When your bank’s customer service has you frustrated

If you are regularly having a bad experience with your bank’s customer service, there is no reason to put up with that any longer. There are plenty of banks out there who will earn your business by taking better care of you as a customer, via the phone, email, or a mobile app.

4. When you can’t do what you need to with your bank’s mobile app

Finally, if your bank’s mobile app is disappointing, you should consider changing to a financial institution that does a better job with its app. Many people handle most of their routine banking tasks online, from paying bills to depositing checks. If you can’t easily do these things on the app, why cause yourself continual frustration by sticking with your bank?

If any of these four situations apply to you, start looking around for a better bank today. Once you get through the process of switching your accounts over, you’ll be a lot happier.

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