Hesitant to Switch Banks? You Could Be Leaving Money on the Table
by Elizabeth Aldrich | Jan. 15, 2021
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Avoiding fees and earning more interest could be as easy as opening an account online.
Many people feel a sense of loyalty after being with the same bank for years. However, with stiff competition in banking and the proliferation of online banks, it's worth considering your options.
A recent study from The Ascent on consumer banking preferences found that 48% of consumers are unlikely to switch banks even if they found one that was a better fit. It also found that nearly a quarter of consumers aren't willing to open an account with an online bank, even though these banks tend to offer the best deals.
You may be put off by the idea of switching to a new bank, but it's easier than you think. By considering all of your options, you could find accounts that help you save big on fees and earn even more in interest.
Know what you're being charged and how much you're earning
Many banks charge a long list of checking account fees you might not even be aware of. One of the most costly are service fees, often called monthly maintenance fees, on checking and savings accounts. These fees can add up, and while they're often waivable, you have to worry about maintaining a minimum balance or having enough direct deposits to get them waived.
These maintenance fees often range from a few dollars to $25 or more per month. That means that over the course of one year, you could be paying $300 just to keep your bank account open. These accounts may also charge late fees, ATM fees, and fees for falling below a minimum balance requirement. And often, they don't even accrue interest.
Look into your own bank account to figure out exactly how much you're paying in fees and earning in interest. Here are some key elements to find out:
- Monthly service fee
- Minimum balance requirement
- Late fees
- ATM fees for both in-network and out-of-network transactions
- Foreign transaction fees (if you travel abroad)
- Interest rate
Finding the best deals on a bank account
Once you've got the details on your own bank accounts, it's time to compare them to the competition. You may find that you're paying more and earning less than you should be.
In the study by The Ascent, almost 23% of consumers said they wouldn't bank with an online-only bank. This could be a costly mistake.
Most checking accounts at big brick-and-mortar banks charge fees and don't earn any interest. Even their savings accounts often earn just 0.01%, which isn't even enough to keep up with inflation.
The best online checking accounts charge no monthly maintenance fees, and many also charge no ATM fees and no foreign transaction fees. You can also earn interest on these accounts, and some of the rates are very generous for a free bank account. It's also easy to find checking accounts at online banks that don't require much money to open or maintain.
As for online savings accounts, most of them are free and can easily earn you 10x more in interest than what you'd get at a big national bank. They also have FDIC insurance, so you know your money is protected.
It's worth shopping around for the best deals when it comes to banking. Switching banks might sound intimidating, but it's actually pretty easy to do, especially now that you can open an account online. For a few minutes of your time, you could potentially save hundreds.
These savings accounts are FDIC insured and can earn you 12x your bank
Many people are missing out on guaranteed returns as their money languishes in a big bank savings account earning next to no interest. Our picks of the best online savings accounts can earn you more than 12x the national average savings account rate. Click here to uncover the best-in-class picks that landed a spot on our shortlist of the best savings accounts for 2021.
Two top online savings account picks
About the Author
Elizabeth is a writer specializing in credit cards, debt repayment, and small business. Her work has also appeared on MSN Money, Yahoo! Finance, and Business Insider.
We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.
