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Should I Switch Banks?

Updated
Kailey Hagen
Author: Kailey Hagen
Kailey Hagen
Kailey Hagen
Writer

Kailey Hagen has been writing about small businesses and finance for almost 10 years. Articles she's written for The Motley Fool have been syndicated to USA Today, MSN, and Yahoo! Finance. She specializes in personal and business bank accounts and software for small to medium-size businesses. She lives on what's almost a farm in northern Wisconsin with her husband and three dogs.

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Many or all of the products here are from our partners that compensate us. It’s how we make money. But our editorial integrity ensures that our product ratings are not influenced by compensation. Terms may apply to offers listed on this page. APY = Annual Percentage Yield. APYs are subject to change at any time without notice.

Pretty much everyone has asked the question, "Should I switch banks?" at some point or another. With so many options out there, including new online-only banks popping up all the time, it can be tough to know if you're getting the best deal where you are.

Ultimately, where you bank is up to you, but here are a few things to keep in mind if you're thinking about trying a new bank.

What are the potential benefits of switching banks?

Changing banks could open the door to higher interest rates, lower fees, better customer service, and simpler account management tools. This is often the case for those who switch from brick-and-mortar banks to online banks. Online banks have lower overhead costs, so they're able to offer higher rates while charging fewer fees than traditional banks.

Should I change banks for a higher interest rate?

High interest rates are one of the biggest draws for customers looking to switch banks, but it shouldn't be the only feature you focus on. If a bank offers a high annual percentage yield (APY) but has poor customer service and error-prone online tools, accessing your funds is going to be a nightmare. So it's wise to consider a good interest rate as just one of several boxes a great bank account has to check.

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Is switching banks hard?

Switching banks can be a bit of a pain, though it may not actually take that long. Many online bank accounts let you open an account from home whenever it's convenient for you. All you need is some personal information and possibly an initial deposit. Once you get everything set up, you can transfer your funds over and start using the new account.

What's more of a hassle is dealing with the old account you're leaving behind. If you have automatic bill payments set up from this account, you'll want to switch these over to your new account right away to avoid any late payments. Then, you can either hold onto the account as a backup or close it if you no longer use it. Some people switching to an online bank prefer to hold onto a brick-and-mortar checking account at least, so they have a place to easily withdraw cash if they need it.

Factors to consider when choosing a new bank

Here are a few things to keep in mind when choosing a new bank.

Security

Most banks offer FDIC insurance, which protects your money up to $250,000 per depositor per account. But it's still a good idea to verify this before you switch banks. If the institution you're considering doesn't have FDIC insurance, your money could be at risk if the bank goes under.

If the bank offers online or mobile banking tools, it should also have adequate encryption to prevent hackers from gaining access to your account. Most banks publish information about their security measures on their websites.

Access

How easy it is to access your money depends on the type of bank account you choose as well as the bank itself. Most checking accounts give customers several options for accessing their cash, but high-yield savings accounts may require you to transfer the funds elsewhere first.

It's ultimately up to you to decide how you want to access your funds. For some, being able to visit a physical branch is key, while others don't need this. Think about your desired deposit and withdrawal options and look for a bank account that offers most or all of them.

Interest rates

Interest rates are another important factor to consider, especially for deposit accounts. If you're interested in the best savings account rates, online banks are hard to beat. Here's a closer look at how a typical online bank's rates stack up against a brick-and-mortar bank's rates:

Account types and features

Most banks and credit unions offer checking accounts, savings accounts, certificates of deposit (CDs), mortgages, personal loans, and more. You may not need some of these services right now, but if you think there's a possibility you'll use them in the future, consider choosing a bank that offers them.

Think about any specific bank account features you may want as well. For example, some bank accounts include budgeting tools or the opportunity to earn interest on debit card purchases. If these things appeal to you, look for a bank account that offers them.

Customer service

Many of us are comfortable banking online these days and rarely speak to a bank representative. But if there's ever a problem with your online account or you have a question about services, it helps to be able to talk to a live person. See what support options are available to you and check their hours. Phone and email support are the most popular, but some banks may offer live chat help as well.

It doesn't hurt to get feedback from the bank's customers, too. If you know someone who banks at the institution you're considering, you can ask them about their service. Or check out its ratings from independent agencies like J.D. Power.

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FAQs

  • Changing banks shouldn't affect your credit score because banks typically don't pull your credit report unless you're applying for a credit card or loan.

  • Yes, it's possible to have accounts with more than one bank, and some people even prefer this.