Should You Switch Banks? Considerations When Changing

Key Takeaways

• When looking for a new bank, choose one that meets your needs and helps set you up to reach your financial goals.
• There are several reasons why you may choose to switch to a new bank, such as wanting a higher savings rate or needing easier access to your money.
• Taking time to prepare for the switch could make the change easier overall.

Common Reasons for Changing Banks

• Wanting a higher rate: Switching to a new bank could give you a higher Annual Percentage Yield (APY). Remember APY is rate you earn with a deposit account, most commonly a savings account. The higher the rate, the faster you could build your savings.
• Seeking better customer service: Banking should be a pleasant experience, whether you’re doing it in person or online. If you don’t feel valued as a customer at your current bank, you may choose to switch to a new one.
• Moving to a new town: If you’re moving to a new town, accessing your money at your current bank may be less convenient. Making a switch may make sense. Note that if you switch to a digital bank, you could access your account completely online, no matter where you move in the future.
• Adopting digital money management: Speaking of digital banks, maybe you’re ready for a little innovation in your banking with online and mobile banking technology. If so, trying a digital bank could help you manage your money more easily.
• Eliminating fees: Some banks charge fees for their checking and savings accounts, and those fees could really add up. By moving to a new bank, you may be able to get rid of those fees entirely.

Things to Consider When Changing Banks

• Minimum balance requirements: While many banks have done away with minimum balance requirements, some still have these in place and may charge a fee if you don’t keep enough money in the account. Consider searching for a bank that offers accounts with no minimum balance requirements as this could save you money in the long run.
• Fees: Some institutions charge customers fees for different things, including account maintenance, transfers, taking money out at ATMs, or dropping below their minimum balance threshold. Look for a bank that doesn’t charge fees just for the privilege of having an account at their institution.
• Rates: Depending on the institution, the annual percentage yield on a savings account may be as low as 0.01%. With rates that low, it’s difficult to grow your money over time. Look for a bank that offers a higher APY. As of September 2024, many digital banks were offering rates of at least 5.00% APY.²
• Bonus offers: Some institutions offer new customers higher rates or a “bonus” if they deposit a certain amount of money during a specified period. Banks that offer this bonus could help you boost your savings.
• Security: When considering where to keep your money, you may want to choose a bank that offers FDIC insurance. The insurance protects up to $250,000 per depositor, per ownership category, per institution if the bank fails or goes under.

How to Prepare for the Switch

• Consider your wants: Before you switch to a new bank, think about what you want in your new financial institution. This could be anything from lower fees to better services and products. Once you identify those must-have features, look for banks that provide them.
• Review account closing requirements at your existing bank: Every bank has different requirements in place for closing your account. They may ask you to provide a letter to close your account or call to speak with a representative trained in closing accounts. It’s a good idea to review these requirements before you choose your new bank so you have time to gather information and prepare any documents you may need.
• Research new banks: Before you switch, you need to know which bank you want to switch to. Take your time and research each bank you’re interested in. Look at their reviews to see what current customers have to say about their services and consider the types of products and accounts they offer.

Final Thoughts