Bank Vault © Radius Images, Jupiterimages

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.

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