Bank mergers are more common than most people think. The Federal Reserve reported 232 bank mergers as of May 2021, with a new report available every Friday.
Banks are acquired by other banks for a variety of reasons, including a desire to scale a business, owners retiring, and cost efficiency. Just because your bank is being acquired doesn’t mean you need to jump ship or find another bank. Often, the process goes very smoothly.
If you’re dealing with a bank acquisition, here are some things you should know in order to make the process of transferring to a new bank as smooth as possible.
Expect Some Changes
The first thing to recognize is that you are likely to experience some changes if your bank is acquired. Fortunately, the bank is likely to do everything it can to minimize disruption. It wants to keep as many customers as satisfied as possible in order to retain its customer base. It’s in the bank's best interest to keep you happy.
The challenge is that when banks merge, sometimes they eliminate or add product lines and/or branches and ATM networks. Sometimes they change fee structures and interest rates on accounts. This can lead to dissatisfaction and frustration for some consumers.
CDs and Mortgages Won’t Change
Because of agreements that have already been signed and generally have fixed terms, the good news is that certificates of deposits (CDs) and mortgages don’t usually change in a bank acquisition. Normally, with a mortgage, you simply change whom you make your check out to, and if you have automatic payments, often nothing will change at all.
The interest rate and term of your mortgage should stay exactly the same in a merger or acquisition, but check the terms of your agreement if you are not sure.
CDs work the same way. The bank will continue paying the CD interest rate both sides agreed on, and making an early withdrawal of the money in your certificate of deposit account will incur the same penalties agreed to when you took out the CD.
Be Aware of FDIC Insurance Limits
If you have bank accounts at both of the banks that are involved in the acquisition process, it’s possible your accounts may end up being over the $250,000 deposit limit that qualifies for FDIC insurance for a single institution.
It's important to note that the FDIC will insure accounts from the old bank separately for six months, but after that, you need to make sure your assets are held at separate institutions if you have more than the $250,000 limit in one institution and you want federal insurance on your accounts.
Keep Updated on Announcements
Bank acquisitions happen slowly because banking is a highly regulated industry. Usually, an acquisition will take between 120 and 180 days to complete. During that time, the banks involved will usually send out notices of any changes to policies and accounts. These notices sometimes come by email and sometimes by regular mail.
By reading those notices, you will know what is going on and if the bank plans on making any changes to products you own, which can help you decide if you will want to change banks after the acquisition is complete.
Try To Get Better Rates
If you are currently banking at a brick-and-mortar bank, you can use a merger as an opportunity to look at new products and take advantage of online-only banks to get much better interest rates on checking and savings accounts as well as CDs.
Online-only banks can take some getting used to, but if you are willing to do most of your banking online and at ATMs, then you can get higher interest rates and lower fees than traditional brick-and-mortar banks.
An acquisition may not change much at the bank being acquired, but it can give you the push you need to see if there is a better deal for you in terms of fees and interest rates.
Normally, bank mergers and acquisitions are done in a way to make it as smooth as possible for existing bank customers. By being aware of the process and any changes that are happening, you can make the best decision for yourself with regard to where you bank.