Published in: Banks | Jan. 24, 2019
4 Reasons You Shouldn't Switch Banks Right Now
By: Eric Volkman
Jumping to another financial institution often isn’t worth the hassle; this is why.
Yes, we’ve heard all the complaints.
“My bank charges ridiculous fees for simple transactions.”
“$[Insert high figure here] for a wire transfer? Really?!”
“They love to nickel and dime the little guy with their annoying fees.”
Banks are the financial institutions we love to hate, particularly if we fall below the elite High Net Worth Individual segment (whom banks don’t want to lose as customers, given how much they add to the deposit base). Is it any wonder so many of us consider switching lenders?
Switching might be a good idea in theory, but we don’t live in a theoretical world. Here is a quartet of reasons you could very well be better off staying with your current bank.
1. Interest rates elsewhere won’t be much higher
Very few people are satisfied with the interest rates they receive on their bank accounts. And why should they be? It’s exceedingly rare for a checking account to offer any interest at all; when one does, it’s almost a miracle if the figure reaches 1%. Savings accounts -- designed for people to keep money in, for Pete’s sake -- aren’t much more generous.
You can probably get a higher interest rate for nearly any banking product you care to name, particularly if you switch to one of a number of online-only lenders, which tend to lead the rate pack. But if it’s a reputable company you’re dealing with, said rate isn’t going to be sufficiently high enough to go through the time and trouble of switching.
2. Staying put might get you a break on fees
It’s an open secret that negotiating with your financial institution on the cost of a product can save you money. Most of the industry’s products, after all, are offered by countless different companies, and are therefore near-commodity goods. What you’ll get from Bank A is usually not so different from what’s being offered by Bank B.
There are many anecdotes from bank consumers about how the hint or threat of defection scored them a better interest rate, lower fees… or even both. Banks need customers for their deposit bases, which are the foundations of their business. They don’t want to lose clientele.
If you feel like your bank isn’t paying you as much as it could for the product(s) you own, don’t be shy about letting them know. And, keeping things respectful and polite, hint that you’re thinking of pulling out your money. It’s very possible they’ll accommodate you -- particularly if you’re a long-time customer, have a large balance in your account(s), or both.
3. Uprooting automated payments can be painful
Two bank account activities that rarely generate fees for users these days are direct deposit and automated bill pay. For many of us it’s convenient to have an employer’s paycheck dropped directly into our account. It’s also nice to have what’s essentially an automated clearing house disbursing funds to settle our bills.
If you switch bank accounts and you are using one or both features, it’ll take some time and effort to untangle them. Your counterparties will have to be alerted that the bank account they’ve been paying to, or being paid from, is no longer valid. Then the new account will have to be connected to those entities.
Although there are more difficult tasks in the world, this untangling and re-tangling requires time and effort. It probably isn’t worth it unless your current bank is so insufferably bad in some way. If that’s not the case, you likely shouldn’t bother switching.
4. Account numbers aren’t portable
If you switch your cell phone provider, you have the right to move your existing phone number from the old provider to the new provider. This is called “portability.” For phone numbers it makes 100% sense, not least because those who contact you at least semi-regularly have that number on speed dial.
This dynamic is somewhat similar with banks (see previous section for situations that benefit from you providing this detail). Life would certainly be easier if we could simply port an account number from one bank to another. That way, we could apply the existing account number to direct deposit/bill pay arrangements with the new bank.
But that’s not the case. As a new customer, your bank will assign a fresh number without any input from you. So add a new account number adjustment to the list of potential headaches generated by switching financial institutions.
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