Personal Finance

Want to Switch Banks? Here’s How to Do It.

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Should I Switch Banks?

We asked Carol Kaplan, a spokeswoman for the American Bankers Association, whether people should switch to a smaller bank or credit union on Nov. 5.

This put Kaplan in a tricky spot. Her association represents banks of all sizes, including the biggest ones. And since the movement to switch banks is rooted in widespread public outrage at rising fees and other bank practices, Kaplan doesn’t want to come out and endorse the idea. Nor does the association want to alienate consumers, even though the trade group repeatedly argues that customers upset over rising bank fees shouldn’t blame greedy bankers, but instead should direct their anger at Congress, which recently passed laws limiting how much banks can charge for debit card swipe fees.

Kaplan said, however, “We agree consumers should choose the banks that will best serve their needs. We may not always agree with their positions, but we definitely agree with their right to express them.”

[Article: 5 Annoying Bank Fees, and How to Beat Them]

Consumer advocates don’t mince their words, however.

“We think it’s a good idea” for people to close their accounts with large banks, says Linda Sherry, spokeswoman for Consumer Action. “I don’t think larger banks really have the customer’s best interest at heart. We citizens bailed them out during a difficult economic time, and how do they pay us back? By suddenly slapping all these new fees on our accounts.”

Meanwhile, credit union advocates make a pretty convincing case for switching your money to save money. In 2010, consumers spent $6.3 billion less on financial services—checking accounts, mortgage loans, credit card fees, etc.—by using credit unions than they would have getting the same services from banks, says Patrick Keefe, spokesman for the Credit Union National Association. That translates to $132 in savings a year per member household.

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“A lot of journalists roll their eyes when I say this, but it’s actually true: Credit unions exist to provide services to their members,” Keefe says. “We actually deliver on that promise.”

Still, you need to figure out if switching banks makes sense for you. As you try to decide, here are things to keep in mind:

Switching banks is a pain.

Transferring your paycheck and all your online bills may be a daunting task. Besides, nearly half of all people who try to open a new bank account online fail, according to a new report by Javelin Strategy & Research, in most cases because they couldn’t figure out how to get their new bank’s website to complete the process.

“We found one out of four people saying ‘This is too complicated, it’s not working for me, I give up,” says Schwanhausser, who wrote the report. “Sometimes divorce is a little messy.”

This failure rate suggests that for all the anger directed at banks right now, large institutions like Chase and Bank of America may have little to worry about.

“I am skeptical about how many people will turn their outrage into action,” Schwanhausser says.

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Should I Go? If So, Where? »

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  • Roger

    Good article. One thing many people fail to do is leverage their total bank relationship. Banks consider the mortgage balance you carry with them an asset; therefore, they’ll likely waive checking account fees etc. So if you have a mortgage at wells, citi, chase, etc. and are looking to switch checking accounts, be sure to check out what your mortgage lender has to offer on a checking account. If your mortgage and your checking acct are at the same bank, and you’re being charged bank fees, call to be sure the accounts are “linked”.

    If you have a bunch of excess cash sitting at the bank, you may want to move the savings balance to online places like ING, HSBC, CapitalOne, etc. that tend to pay much higher interest rates on savings (since they don’t have the same brick & mortar costs to pass along to you). My opinion, though I’m not an expert.

    Great article Mr. Maag, interesting stuff!

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