Should You Move Your Money to a Bigger Bank Right Now?

There's a lot you need to consider before moving your cash.

The collapse of Silicon Valley Bank and Signature Bank last month left a lot of people worried that their bank might be next. This was especially true for those who have their money in smaller, regional institutions.

In the weeks following the failures, 16% of Americans say they've moved some or all of their money, according to a Morning Consult survey, and 36% of those say they moved their cash to a large, national bank. But that may not be the right decision for everyone. Here are a few factors you need to weigh before making that call.

It's not a question of safety

Many of the people surveyed listed national banks as the safest place to keep their money right now, presumably because these institutions are least likely to fail due to their size. But it's a mistake to assume that smaller regional banks aren't capable of adequately protecting your money.

Even in the case of Silicon Valley Bank, none of its customers lost any of their savings because the bank was FDIC-insured. FDIC insurance protects your money up to $250,000 per person, per account type per bank. So as long as you bank with an FDIC-insured institution and don't keep more than this in your account at one time, your money is safe from loss.

In the worst-case scenario, you could lose access to your funds for a few days, as was the case with Silicon Valley Bank. It closed on March 10, 2023, and customers weren't able to access their funds until the FDIC transferred its funds to a new bank on March 13, 2023. Even this is unlikely as many regional banks remain strong.

If you're really worried about losing access to your cash, you might consider opening a bank account at a national bank and keeping some money there. But you don't have to close your old bank account unless you're unhappy with it.

Factors to consider when switching banks

Large national banks have their perks, but they have drawbacks as well. Before you move your money, here are a few factors you should weigh to decide if it's the best move for you.

Interest rates

National banks typically aren't known for providing high interest rates on deposit accounts. Large branch networks are costly to maintain, and that doesn't leave a lot of money left over for banks to pass on to their customers. Regional banks, on the other hand, are sometimes able to offer higher interest rates because they don't have as large of a branch network.

But if you want to earn the most money possible on your savings, an online bank is your best bet. These banks don't have any physical branches, which reduces their overhead costs significantly. And many of them are FDIC insured, so your money is protected the same way it would be in a brick-and-mortar bank.

Customer service

Customer service can vary significantly by bank and even from one branch to another. But some people feel that regional or community banks provide better customer service than large national banks where you're just a number.

Again, this comes down to personal preference. Many people have little to no interaction with bankers these days because they can handle a lot of their banking tasks online or from their phones.

But if customer service is a priority to you, you should do some research to see how the national bank's customer service stacks up to your current bank's service. You can test this out for yourself by calling the bank with questions or you can look up customer reviews online.

Fees

Brick-and-mortar banks tend to charge more fees to consumers than online banks. Both regional and national banks charge maintenance fees to customers who fail to maintain a certain minimum balance or complete other qualifying activities.

But as mentioned above, regional banks typically have lower overhead costs and they may be able to offer you a better deal. Always review the fee schedule for any bank account before you open it so you know what you're getting.

The hassle of switching

Switching banks can be a bit of a pain. First, you have to provide all the necessary documentation to open an account. Then, you have to transfer your funds, which can take a few days. And if you have automatic bill pay set up, you'll need to transfer those payments over as well. Finally, you'll have to decide what to do with your old bank account.

It might be worth all the hoop-jumping if you dislike your current bank account. But it could be more trouble than it's worth if you're doing it just to try to keep your money safe.

In the end, it's up to you to decide whether moving your money is the best decision. But remember, you'll probably have your new bank account for a long time, so you want to make sure you're happy with what it offers before you sign up.