1/23/2014 4:30 PM ET|
Consumer's guide to breaking up with your bank
The fees have really piled up lately, and you and your bank have drifted apart. Here's how to make a clean break and find a new home for your money.
Here’s a great idea for people who want to improve their finances and their mental health: audit your bank.
Odds are, even if you’ve thought about switching banks, you haven’t done it. Only about 3 percent of consumers actually switch banks, even though far more consumers are unhappy with their financial institution, according to a Javelin Strategy and Research report.
A fifth of consumers with checking accounts would like to switch, found according to a survey last year by Consumers Union, the policy and advocacy arm of Consumer Reports.
Sixty-three percent said they hadn’t made the move because it was too much trouble to transfer their account from one bank to another, and 37 percent said the process takes too long. Twenty-eight percent said they didn’t want to pay any fees to transfer their own money.
“Some banks will charge you $25 to move your own money and others will charge you if you close your account too soon,” says Pamela Banks, senior policy counsel for Consumers Union.
As a result, only about 3 percent of consumers actually switch banks, even though far more consumers are unhappy with their financial institution, according to a Javelin Strategy and Research report.
While Consumers Union is now advocating for Congress to pass the Freedom and Mobility in Consumer Banking Act, which would prohibit various bank practices that make it difficult for consumers to transfer their money, Banks says that regardless of the law that in the meantime, “You should switch banks if you don’t feel you are getting the service you want” from your bank.
Follow these steps to say goodbye to your bank for good.
1. Know when to move on
“If you see new fees that are not easily avoided, I would say it’s time,” says John Ulzheimer, a credit expert for SmartCredit.com. “That would apply to savings and checking, and you should apply that to credit cards as well.” Other signs it’s time to switch: your bank has a minimum balance requirement, poor customer service, or doesn’t have the online or mobile banking features you’d like. If you have good reasons to take your business elsewhere, don’t let inertia take hold.
2. See what other options are out there
Start with sites like Bankrate.com, FindaBetterBank.com, and SavingsAccounts.com, being sure to investigate online banks, which generally feature higher interest rates and will reimburse you your ATM fees.
In addition to looking at banks, see if there are any local credit unions that will fit your needs. Credit unions tend to have a more limited ATM network, but lower rates and fees and more personal customer service. “For a mortgage, a credit union is always going to be a better option than a bank,” Ulzheimer says. “There are a lot of fees that you’re not going to have to pay, and the interest rates will be competitive.”
You can search for community banks and credit unions at Kasasa and at creditunion.coop. Although credit unions are only open to people who are eligible, fields of membership have been expanded dramatically over the next decade or so. “Many people might be eligible today that don’t even realize it,” says Greg McBride, a senior financial analyst at Bankrate.
One must-have feature: federal deposit insurance, which protects accounts up to $250,000 in case of a bank failure.
3. Compare your options
Ulzheimer suggests looking for a fee-free checking account with a fee-free debit card. Although that’s getting harder; just 38 percent of banks offered free checking this year, down from 74 percent in 2009, according to a recent Bankrate report.
Often you’ll have to meet certain requirements in order to score free checking. If a bank account charges you for not staying above a minimum balance, the bank is essentially asking you to lock up part of your money. If you’d rather have more flexibility, look for an account without a minimum deposit requirement.
Also consider whether the bank offers your particular needs, such as mobile capabilities or a large ATM network. For instance, an online bank isn’t a good fit for someone who gets paid in cash, but might be perfect for someone paid by direct deposit who does all her banking by laptop and smartphone.
For savings, look for the best return available for the amount you have to deposit. It’s also a good idea to get a savings account that allows you to have sub-accounts, so you can keep money for emergencies separate from money you are socking away for your next trip.
4. Give your bank one last chance
Visit your current bank, or call its customer service department to let the institution know that you’re ready to cut ties. When you explain your reasons for cutting ties, your old bank may make you a counter offer that makes it worth staying.
If not, be sure to get detailed directions on how to end the relationship, so that you don’t get hit with unexpected fees after you think you’ve closed it.
5. Open the new account
At the onset, you’ll have to run both accounts in parallel as you gradually shift automatic deposits and payments from your old bank to your new one. This should take about two months, but you might want to run it a full quarter to make sure you’ve got all transactions coming in and out.
Move all your direct deposits to your new bank, and set up bill pay in your new account, so that all the bills you automatically pay get sent out from the new institution. Meanwhile, keep enough of a balance in your old account to fund any scheduled payments and checks remaining to be cashed.
6. Cut ties for good
Once all the payments have been made and your migration is complete, ask your bank to cut you a check with the remaining funds. Then start thinking about what you’re going to do with all the money you’re saving by not paying unnecessary bank fees.
Common bank fees
- Monthly maintenance fee on checking accounts: The average monthly fee for a checking account is $12.43, or almost $150 per year, according to an analysis last August by MoneyRates.com.
- Overdraft protection fees: These fees range from $20-$35 per overdraft, and average $31.60, depending on how quickly the loan is repaid, how much the bank charges per overdraft, and how much interest is charged.
- Wire transfer fees: You’re rarely charged if the transfer is within the same bank. But if the transfer comes from another bank you can pay $15 or more.
- ATM fees: They range from $0 to as much as $4 in some banks. Check it out.
- Paper checks: Unless you maintain a hefty balance, you will probably pay for paper checks -- anywhere from $15-$25 for a couple of hundred. All the more reason to bank on line.
- Credit and debit cards: Check out the bank policies before you sign up. Some offer no annual fee but high interest rates. Others charge for every debit card transaction.
More from The Fiscal Times:
VIDEO ON MSN MONEY
They act surprised as if I had no good reason to move.
But I have dozens of good reasons, and they just kept coming.
The commercial banks are going to lose most of their customers if they keep up like this. If they whack good old customers' butts with ridiculous fees for doing abosolutely nothing wrong, imagine what they would do to customers if they DID do something wrong.
Not at all true. Most Credit Unions are tied into absolutely-no-fee networks of 70,000 or more nationwide ATM's including those in every 7-11, Target, and Costco.
Additionally, credit unions - almost all are federally insured to the same extent as banks - typically have no debit card swipe fees, no or tiny fees for checking overdrafts if savings can cover it, and much better interest rates.
The average person should flee banks for credit unions now. 7,000,000 supposedly already have and the banks are despicably reacting by trying to get Congress to revoke the Credit Unions' non-profit status.
Try to find credit union that has lots of branches in your state like a State Employees Credit Union (SECU). And even with a name like that almost anyone can join - you don't have to be a state employee.
Move most of your money into the Credit Union, leaving enough in the bank to cover automatic monthly payments until you get everything switched over to the new account. Then close your bank account and say you're disgusted at how you were treated. Maybe the banks will stop acting like they're doing you the favor by holding your money!
My bank (Independent Bank of Texas in Irving, TX) pays me 2.51% on my no-fee checking account balance (up to $25K - which is rare when it's over that). The three requirements are easy for me. 1. get an eStatement instead of paper. 2. Have at least one ACH deposit per cycle (I have my pay check direct deposited, so that's easy), and 3. Have at least 12 debit card transactions where I use the credit side (and not PIN based) - and I usually have around 20 a cycle.
I earn more interest in a month there than I do in two years at my old bank.
I love them. Awesome service too.
Re: Common Bank fees...
The author lists out several common bank fees. Wire fees, hot check charges, etc. Should point out those fess are just as common in credit unions and the old Savings & Loans institutions as well.
re: Credit Unions... My only problem with Credit Unions is that they do not pay any Federal Income Taxes. I sort of want everyone (and every money-making enterprise) to pay taxes. Sure they are chartered as a non-profit, and that's fine for the original purpose credit unions where there was a little office next to H.R. at your employers locations. But man, some of these Credit Union are huge, and dare I say very profitable.
But the IRS tax code allows them to be non-profit, so it's within the law and maybe I shouldn't belly-ache. And hey, I've heard the National Football League is also a non-profit (is this true? correct me if I'm wrong) and therefore pays no Federal Income Tax either. And baby, I thiNk the NFL is making some major bank!
B of A, Wells Fargo, Chase, Citicorp, and other similar financial institutions are designed, and
intended for, big people. I.e. those who are privileged to be able to afford to live in elaborate
estates, drive upscale or better vehicles, wear designer clothes, enjoy four or more weeks of
annual vacation, etc. If you're one of those less fortunate people who lives in a modest house,
drives a "run of the mill" automobile or a pick up truck, wears average clothes, and is lucky to
have two or three weeks off each year, then these institutions are hardly for you. And, if you
happen to be one of the real unfortunate people out there, who have to live in a rusty trailer in
some obscure trailer park, get around in a clunker and a cheap moped, wear shabby clothes,
and is lucky to get Sunday mornings off, let alone dare to even wish for even any semblance
of a vacation or holiday, then don't you dare go anywhere near any of those aforementioned
elite financial institutions. If you do, it'll only be a matter of time, when, not if, that you'll only
wind up regretting doing so. You need to seek out a little financial institution for little people,
such as a regional bank, or a credit union, if such exists. Other options for you, such as online
banking or even a prepaid debit card have their drawbacks, as well as their advantages, such
as their own fees, and lack of face to face customer service, but you might be able to come
out ahead with one of those, over the long haul. I've learned the hard way, myself, that unless
you're blessed to be a part of the elite, then you need to steer clear of those financial institutions
that are designed, and intended solely for, the privileged elite, and not for us little people. If you
are a pony league baseball player, then you need to play baseball on a pony league team, and
do not attempt to join a major league team. Those above financial institutions, are major league
teams, and they all play hardball.
Copyright © 2014 Microsoft. All rights reserved.
RECENT ARTICLES ON PERSONAL FINANCE
New rules mean that longevity annuities -- insurance against outliving your money -- are more attractive for retirement savers.