Eliminate Banking Fees by Changing Banks
If you haven’t heard by now, many big banks are sticking it to their customers with new, and higher fees. Especially debit card fees. They argue that due to new credit card regulations they are forced to institute these new fees to recoup that lost income. In fact, Bank of America has gone as far as to say they have a right to make a profit. At first I shrugged it off and somewhat agreed, just like consumers have the right to choose another bank.
But my friend Liz Weston tweeted to clarify and said they have the right to try to make a profit. That is a far more accurate statement since nobody and no company is simply entitled to make money. So, are the banks on the right track trying to turn a profit by gouging customers? Given the outrage we’ve seen online and in the media, I think it is doing just the opposite. And if you’re stuck with one of the banks doing this, here’s how you can switch banks without much hassle.
Identifying Why You Want to Leave Your Bank
Before you hastily go to the bank and demand all of your money, you need to step back and determine what it is about your current bank that is forcing you to look elsewhere. After all, if you aren’t exactly sure about all of the downsides of your existing bank, how will you know what to look for when searching for a new bank?
Obviously, fees are probably going to be one of the main culprits. So take a few minutes to determine all of the fees you’re getting charged, or could potentially be charged. This includes everything from debit card fees to overdraft and account minimum fees. Go ahead and jot these down so you can easily refer back to them when comparing other banks.
Next, think about the service. Even if you don’t visit a local branch regularly, if you’ve had a bad experience with the service at your bank, take note. Good service is hard to come by these days and when you think back about what irritates you most about your current bank you can be sure to ask questions about the service options at your new prospective bank.
Consider a Credit Union
There are plenty of good banks out there, but don’t rule out credit unions. There’s a common misconception that credit unions are reserved for people associated with certain employers or associations, but this isn’t always the case. Yes, some have membership limitations, but many will accept members from almost any background. So it’s certainly worth your time to explore that option.
The benefits of a credit union are many. Most importantly, by joining a credit union you become a member, which is like becoming a part owner. Rather than depositing your money into some massive national or global corporation, you’re actually putting your money into the very organization that’s likely a local operation that benefits your own community. And going one step further, credit unions are non-profit organizations, so there’s no incentive to rack up insane profits to pay executives tens of millions of dollars trying to squeeze out every penny from their depositors.
In addition, because credit unions aren’t continuously trying to boost profits for shareholders, there are simply fewer and lower fees across the board. Loan rates are usually better, there aren’t any debit card fees, and even the fees they do have are typically far more reasonable than what you’ll find at a comparable bank.
Determine What is Most Important in a Bank or Credit Union
Now that you’re in the process of seeking out that new banking institution, you need to have a clear set of features that are important to you. Just because the bank or credit union down the street doesn’t charge debit card fees or stick you with account minimum fees, that doesn’t mean it’s the best bank for you. Your specific needs will dictate that.
For instance, if you’re a heavy ATM user, finding a bank or credit union with the most local ATMs or most friendly ATM fees is going to be a priority. But if you’re someone who rarely uses an ATM but in an emergency, you probably couldn’t care less if your bank didn’t have an ATM within 1,000 miles. Obviously, the best bank for someone else may not be the best bank for you.
Here’s a personal example. I use two financial institutions. A credit union and Chase bank. Both are used for different purposes. My credit union is from when I was in college and they are no longer local, but I use them for most of my lending needs because their rates are amazing. But I would have a hard time using them for daily banking because the nearest branch is over 100 miles away, and they lack many of the online and mobile banking tools that other institutions offer.
That’s where Chase comes in. I do a lot of business banking, and as far as I’m concerned, they are among the best when it comes to business banking. I also love how my local branch has a special business teller area so if I do go in I get to skip right to that section and get helped immediately. But the technology they offer is what really keeps me around. Online and mobile banking is superb, and the ability to take a picture of a check with my cell phone and deposit it automatically from anywhere is pretty awesome. I receive a lot of checks unfortunately, so when I get one in the mail and don’t feel like driving the 20 minutes to the closest branch (yes, I live in the middle of nowhere!) I can just whip out my phone and make a deposit. Saves me 40 minutes of drive time and probably a couple bucks in gas.
So, know exactly what you need from your bank and shop accordingly. Just because a friend suggests XYZ bank because they don’t charge a specific fee that doesn’t mean it’s the best for you.
Opening Your New Accounts
Once you’ve found that new bank or credit union, you’ll obviously have to open your new accounts. But don’t close out your old accounts first and walk in with a bag full of money to deposit into your new account! You will want to get everything up and running with the new bank before making the transition.
When you go into the new bank it pays to sit down with a banker rather than just winging it over the phone or through their website. Yes, it will take a little bit more time and you may encounter a little upselling, but working with someone directly to discuss what you need, what you want, and fees you want to avoid can help ensure you get put into the best accounts for your situation. If they try to sell you a credit card or fancy features to add to your account, just politely decline. You can always add those later when you have more time to look into them. Plus you can usually find even better credit card deals elsewhere.
Closing the Old Accounts
After getting your new accounts set up you’ll want to then go back and start working on closing the old accounts. The reason you waited to do this step is because you may have a lot of pending transactions that could get messed up if you close the account prematurely. For example, things like direct deposit, auto bill-pay, or outstanding checks need to all be cleared first, otherwise you could end up with bounced checks, failed deposits, and nasty fees. Also, if you write checks for some things, it will probably take 5-10 business days from opening your new account before getting your new checks, so you don’t want to be in a position where a bill is due and you don’t have checks for the new account.
So before closing your old accounts first check to see what pending transactions you have coming out of the account. It could be electronic bills that are coming due or a check that hasn’t been cashed yet. If there are bills soon to be paid with this account, you can wait to let that happen, or if there’s enough time you may be able to stop it and provide the new account information. This is also a good time to go into your new account and switch over any online bill payment methods so they are ready to go once you transfer the funds. And don’t forget links to external accounts. You may have your IRAs and other investment accounts tied to the old account, so double check and update that information as well.
In regards to direct deposit, this is key because depending on where you are in the payroll cycle it could take a week or two before the information is updated, which could mean deposits to the old account can’t be changed before the next payday. So be sure to get with your employer and change that account information. You don’t want to be in a position where you’ve closed the old account only to find out on payday you never got paid because that payment was selected for the old account.
After all the checks have cleared, bills have been paid, and direct deposits made, you can finally go ahead and close the old accounts. Don’t fret. Even if it takes a few weeks to finalize this process and causes you to incur one more five dollar fee, that is far better than dealing with a bounced check, failed deposit, or late fees on missed bills.
Transferring to the New Accounts
Now that your old accounts are squared away, transferring to the new account is pretty simple. Again, don’t walk into your new bank with a sack full of cash that you withdrew from the old bank. Instead, you can almost always request an electronic transfer or get a cashier’s check from your old bank to deposit into the new one. But it’s never safe to be walking around with a bunch of cash, so don’t be foolish.
Many banks and credit unions are now offering what is called a “Switch Kit,” which is a five-step program with all of the necessary forms and phone numbers to help you through the transfer process. Be sure to ask about this since it can save you some time.
Even if you’re found a great bank or credit union to switch to it’s still worth looking at online banks for some or all of your banking needs. Banks and credit unions still typically lag behind online banks when it comes to savings account rates. So, while you may need the local convenience for your daily banking needs, you may still be better off putting that emergency fund or other savings in an online bank that generates even more interest. In addition, there are even some banks, like Perkstreet, that give you cash back on debit card purchases. That’s a far cry from banks charging you just for the privilege of having a debit card!
So, be sure to check out the latest online savings account rates to see if you can do better than your existing or new bank. Personally, I use Perkstreet Financial for much of my savings right now. The rate is good, and I’m a sucker for awesome online interfaces. The easier and more pleasant they make it to bank online, the more likely I’ll use them. I don’t mind missing a few basis points for better service and features.
Making the Switch
Switching banks is a pain, there’s no way around that. When you think about all of the automated bills, deposits, and other features you’ve grown accustomed to over the years, it’s a daunting task to pick up and move everything elsewhere. Financial institutions are counting on the often painful task of switching so they can tack on small fees and capitalize on those who don’t want to be bothered with switching.
Don’t be afraid to change banks. Yes, it will take a little time, but being nickel and dimed to death with new fees makes it more than worthwhile. Plus, this has a cumulative effect. If the banks that are sticking consumers with these new fees see a lot of people leave, they lose money. That means they will have to reevaluate their fees and change how they operate to remain competitive with those who are stealing their business. It is this competition that will benefit everyone.
So, vote with your feet. If your bank is sticking it to you, take a stand and move on. It’s your money, and you have the right to do what’s best for it.
Author: Jeremy Vohwinkle
My name is Jeremy Vohwinkle, and I’ve spent a number of years working in the finance industry providing financial advice to regular investors and those participating in employer-sponsored retirement plans.