If you’re thinking of switching banks, you are not alone. According to a 2021 study, one in every five Americans has changed their primary bank between 2019-2020. It seems that millennials are those who tend to switch banks more often, with 33% having done so between 2019-2020 while another 37% planning to do the same.
Surprisingly, according to the same research, of those who have either changed banks or want to do so, about three quarters were satisfied with the bank they collaborated with or are currently happy with the bank they plan to leave.
No matter if you just want to try something new or you’re eager to change your bank, it’s important to make the switch and experience better deals. However, switching banks may get you hassled, so give it some thought to ensure it’s the correct decision. As you already know, there are some advantages and disadvantages when it comes to changing banks.
But don’t worry, we have 8 pros and cons when it comes to switching banks. Keep on reading to find out if this step is the best option for you.
Pro: You Can Find Better Deals
Staying with the same bank is both an easy and convenient option, but it may come with a cost. In some cases, changing financial institutions can be a smart move. This decision can help you save money by finding higher interest rates for your savings accounts.
This is always a good idea, especially if you want to beat inflation. Finding better deals such as a lower interest rate on loans, as well as additional products and offerings can also motivate your decision to change banks.
Some financial institutions charge lower fees than others, and some will provide you with better deals that genuinely help you save more money in the long run. Sometimes, you may even pay for a service that you don’t really need, but it’s included in your package.
As a result, switching banks could give you some money you wouldn’t have if you stayed with your old financial institution.
Con: You May Incur Hidden Fees
Switching banks may appear to be a way to save some money, but Brett Sohns, the co-founder of LifeGoal Investments, claims that there are banks that may charge some hidden fees for new account holders.
Make sure you read every document the bank gives you very carefully to find out whether there are any fees for closing an account or for withdrawing money from savings accounts,” he added. “If you’re asked to open a linked account when opening a savings account, don’t forget to look into the fees involved with opening that account too.
Some financial institutions may require you to keep a minimum balance on your account to avoid any potential fees. If you have several accounts at multiple banks, this minimum balance can affect your financial state.
Always examine the fine print and don’t hesitate to ask if you have any fees-related questions. Switching banks and assuming there won’t be any fees could cost you.
Pro: Customer Service May Be Better Elsewhere
If your bank doesn’t provide good customer service, Sohns says switching banks and shifting your money elsewhere may make sense. No wonder why customer service is extremely important: more than half of those who change banks made this decision due to poor customer care.
Since the system has removed many barriers reducing the average switch time radically — from about one month to about one week — more and more people are ready to change financial institutions.
You may also discover that customer care is better at another financial institution, making it a more pleasant experience. This is vital, especially if you dread dealing with rude customer care representatives at your bank or if you have to submit multiple messages before receiving a response.
Con: A Longer Approval Process
There is a good chance that those who have been customers of a bank for quite a while may have some perks that new clients don’t have. For instance, maybe you’ve found a great account manager who’s well-informed about your finances.
Get ready for the chance of finding someone else who doesn’t understand your vision. Also, if you’ve been a long-time customer at your financial institution, it may be easier to receive approval for new accounts as you have a history with that bank.
This wouldn’t be an issue if you don’t intend to open any accounts in the future. However, if you’re looking for additional products such as a mortgage, it’s something to think about before switching banks.
Pro: Get Services That Better Match Your Needs
You’ve had your current bank account for a while now, but your needs have changed. According to Shawn Plummer, a licensed financial professional and the CEO of The Annuity Expert, the ability to enjoy great services that are better adjusted to your current lifestyle is a strong reason to make the shift.
“For instance, you might have building assets in another country that necessarily involve carrying out regular FX transactions, so shifting to a bank that has favorable FX rates is justifiable,” he said.
There is no need to stick with a financial institution that no longer serves you, so switching banks makes sense.
Con: Switching Banks Can Be Time-Consuming
According to Plummer, changing banks isn’t the easiest operation as it can be time-consuming to update your information, including with your employer. In most cases, you can simply update the details with your employer’s Human Resources department. Yet, if you receive payments from PayPal or other income sources, it’s essential to include them as well, even if those payments aren’t frequent.
“You may need to change direct deposit and auto debit set-ups that you’ve had for years,” Plummer said. “If your information isn’t updated on time before the next invoice, you may have to deal with lots of missing payments and forms.”
It’s important to think carefully before switching banks. If you think you won’t have time to update these details, it may be best to wait until you can make more room in your schedule.
Pro: Take Advantage of Sign-On Bonuses
Some financial institutions offer hefty bonuses to lure new customers. If you’re thinking about switching banks, this is an easy and simple way to get free cash. For instance, some banks offer sign-up bonuses of $100 or even more if you decide to park your money in a new home.
These bonuses are typically available for a limited time, so don’t put this decision off too long. If you do choose to change banks, make sure you read the terms and conditions agreement carefully to ensure you’re willing and able to meet the requirements to collect the entire bonus.
Con: No More Solid Connections
Your bank’s employees may be nice and well-prepared which creates a pleasant place to do business. Plummer said it’s important to understand that switching banks means you’ll have to start over with different employees.
He also noted that this isn’t always easy, especially if you knew tellers and account managers at your old financial institution well. It takes time to build new connections and relationships, and there are no guarantees you’ll get along with your new bank’s employees as well as you do with those you currently collaborate with.
Now, if your bank’s customer care leaves much to be desired, then you won’t lose something you don’t have — solid connections. But if you’ve built some solid connections, you may want to think carefully before switching banks.
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