Want to perform the ultimate act of ‘adulting?’ Switch banks. You know you probably should. But it sounds so boring. And you wonder, does it really make a difference?
Most folks assume that the benefits are paltry. So they stay put. That is known as inertia bias.
We opt to not change the status quo because the banking relationship we’re currently in doesn’t feel acutely painful. It’s more like a dull ache. Even though we know we can do better, we opt to do nothing.
Check this out. The average person has been with their bank for 14 years. Most of us aren’t that loyal to any other institution. Heck, the average Millennial changes employers every 3 years or so. It’s also far longer than the average marriage.
But enough about that, I’ve got good news for you. Switching banks isn’t difficult! This little piece of adulting will go a long way to changing how you view and handle your money, too.
Fight ‘the man’ by switching banks
For the first time ever, the big four banks which include Chase, Citigroup, Wells Fargo, and Bank of America, have more than $10 trillion in deposits. That’s trillion with a T! This represents more than half of the savings that Americans are holding on to.
This is a concerning statistic if you care about healthy levels of competition which are the lynchpin of capitalism. If most of your savings currently reside with one of the biggest banks in the country, the survival of our democracy depends on your banking choice!
Ok, that might be an overstatement.
But chances are that you’re a prime candidate to change your allegiance and find a new bank. Here’s why.
You’re being charged monthly fees
At How to Money, we hate fees. They’re kind of like mosquitos in the middle of Summer. We’d love to see them wiped off the face of the Earth. Not every fee is completely unnecessary. You can’t avoid them all. But for some reason, the large majority of Americans consistently choose to do business with the banks that charge the most egregious fees.
Which segment of the population is paying the most in fees? Stats show that Millennials and Gen Z are paying more in bank fees every month than their counterparts from other generations. It’s time to change that.
One of the most frustrating fees that most banks charge is overdraft fees. If you spend more money than you have in your account, your wallet gets pounded. The average overdraft fee is just north of $40!
If you’ve ever made this mistake you know how frustrating and financially painful it is.
We’ll talk more about which banks we recommend in just a bit, but it’s great to see banks like Ally & Capital One eliminating overdraft fees altogether. We’d love to see this trend catch on like wildfire.
Many banks charge you to access your own money
Many banks also love to create fees so that they prosper when you need to get your hands on the money you’ve saved. Doesn’t that sound insane? If you want to pull money out of the nearest ATM, you’ll get hit with a fee at most banking institutions. The average ATM fee these days is $4.59. Depending on how often you snag cash, those fees add up.
But do you need to pay a fee to take your own money out of the bank? No way! This one is easy to avoid just by doing business with the right bank, one that doesn’t exist solely to profit via extraneous fees.
These banks also like to charge you for the privilege of parking your money with them in the form of a ‘monthly maintenance fee.’ That’s right, you might be paying your bank $12 a month, which equals $144 a year for them to hold onto your funds in a checking account. That would be even less than the average maintenance fee of $15.50 a month.
Continuing to pay this fee would be like still paying AOL for your @aol email address. We all know that would be absurd. Email addresses are free in an abundance of places. Run to Gmail, Yahoo, or ProtonMail instead!
Your bank might allow you to jump through some hoops in order to sidestep these fees by keeping at least $500 in your account or by depositing your paycheck directly into that account.
But all of our favorite banks have done away with these account maintenance fees altogether. And they don’t require you to jump through any hoops to make it happen.
You’re making nothing on your money
Did you know that big banks like Wells Fargo are paying .01% on the money you’ve got in your savings account? How much does that translate to? You’ll make $1 a year on a balance of $10,000. That feels like a slap in the face when other banks are paying at least 25x that amount.
Let’s be honest, you’re not going to get rich on your savings no matter which bank you’re with. Not in 2022. You’d only make $50 a year based on what the best online banks are able to pay you right now.
But that doesn’t mean you shouldn’t prioritize doing business with a bank that pays close to what the market rate is for savings these days. Don’t give any bank your business if they aren’t willing to offer reasonable perks that are widely available elsewhere.
The customer service sucks
You might say that you’re with this crummy fee-laden bank because of convenience. I mean, they’ve got a branch on every corner, right!?
But how often do you actually walk in there? And when you have a problem, how responsive has your bank actually been?
Two of the biggest banks, Wells Fargo & CitiBank, rank far below their competitors each year in JD Power’s annual customer satisfaction survey. The worst banks often cause more headaches in your life than they remedy.
Just try calling that 1-800 number and see how long they leave you on hold before letting you talk to a human. It’s gonna be a while.
The features aren’t ‘all that’
Is your banking app clunky? Or does the website lack the features you need? With the rise of online banks, we’ve seen creative new features that are making a big difference in how people interact with their bank and how they are incentivized to save more of their money.
Some of those features include access to your credit score, receiving your paycheck a couple of days early, financial literacy help, & organizational money tools that can help you achieve your financial goals more quickly.
If your bank hasn’t caught up with the times, you should consider switching to one that is working hard not just to eliminate fees but to provide the most relevant features.
Find a bank that side steps these old-school tactics and take your business elsewhere.
Looking online is the best place to start
Online banks are #1 in our hearts. That’s because the best ones offer the most robust features, excellent customer service, and better interest rates on your savings.
Ally might be the best of the bunch. This bank has a history of offering innovative features like ‘raise your rate’ and ‘no penalty’ certificates of deposit. But the features we’ve found most useful are ‘buckets’ and ‘boosters.’ Buckets help you to more easily save for specific goals while boosters allow you to set up automatic transfers towards whichever buckets you choose.
I’ve had a Discover account for a few years now and they’re well worth considering also. They offer competitive rates, next level customer service, and solid features. For instance, if you are one of the few folks that still uses checks, Discover makes them 100% free. They also make ATM withdrawals free at a huge swath of ATMs nationwide.
ING Direct began the online banking revolution. But Capital One bought them a number of years ago. Still, they’ve kept many of the great features that ING offered. And they’ve even added more benefits in recent years, including free access to your credit score.
There are plenty of other online banks who are making great strides and offering solid products. Marcus, CIT, Amex, & One are also legit online banks worth looking into also. Since all of these banks offer different perks, the bank that’s best for you might not be the bank that’s best for me.
Sometimes the best bank is a credit union
We’ve been fans of credit unions for a long time. I’ve been a member of my local credit union for over a decade. And it’s been a lovely symbiotic relationship. The major problem for most folks when it comes to doing most or all of their banking with a credit union is inferior technology.
Most credit unions don’t have slick apps or updated websites. Honestly, that’s the main beef I have with my credit union and it’s why I don’t keep my savings there. Credit unions also aren’t as competitive as online banks when it comes to the rate of interest they pay on your savings. Although some credit unions have partnered with Kasasa to offer higher deposit rates to their customers.
Still, it’s really helpful to have a relationship with your local credit union even if you don’t turn there for all of your banking needs. They are a particularly excellent place to look if you are taking out a loan for a car or a home purchase. You can find a credit union near you by going to MyCreditUnion.Gov.
Low-cost brokerage companies have solid banking products too
Some of the best banks are low-cost brokerage companies. Charles Schwab & Fidelity have, in particular, done a great job offering solid banking perks to their customers. Schwab pioneered the concept of unlimited ATM fee rebates worldwide. Fidelity quickly followed suit.
Schwab doesn’t charge foreign transaction fees on purchases you make while abroad. If you already have a Roth IRA or other investments with either of these two brokerage houses it’s likely worth doing some of your banking with them too.
How to actually switch banks (it’s not that difficult)
Now that you know that banking doesn’t have to be a soul-sucking endeavor, that it can be better, it’s time to pull the trigger.
Opening a new account with your preferred online bank, credit union, or brokerage house should take just a few minutes. Most of our favorites don’t require you to have a minimum balance in order to open an account. That means you can dip your toes in if you are still unsure.
Once you’ve established that new banking relationship, it’s time to start making this fantastic new bank your money hub. Matt calls his main bank (Ally) the Grand Central Station for his finances. Every dollar he makes flows in and out of that account.
That means canceling any recurring payments that you were making from your old account and set up fresh ones from your fancy new bank account. And switching any automatic bill pay from the old account to the new one.
Link the two accounts that you have & initiate an ACH transfer so that the bulk of your money is now in that new account. If your employer pays you via direct deposit, make sure to redirect that to this new bank account too.
You’ve got this
Leaving your old bank isn’t as hard as it seems. And the benefits of making that switch are myriad and meaningful. Don’t stick your head in the sand like an ostrich, because this task is actually quite easy.
If your goal is to get better with your money, make sure that you’re banking with one of the banks that wants to help you in that endeavor, not one that’s trying to make money off you at every turn.
Once you’ve made the switch you’ll wonder why it took you so long.