When Is It Time to Break up With Your Bank?

You can switch whenever you like, but know your options first

Customers standing in line in bank
••• Jason Dewey / Getty Images

When you think of ways to spend your day, switching banks probably isn’t at the top of your list. It’s a time-consuming task, and mistakes can be costly. But your bank accounts are critical to managing your finances, and using the right bank can save you money and enhance your life for several years (or more).

So, how do you know when it’s time to break up with your bank? The situations below are good reasons to start shopping for a new banking relationship.

You’re Paying Fees

Bank accounts don’t need to be expensive. Especially when interest rates are low, monthly fees and other charges can drain your account. You rarely get your money’s worth when paying high fees.

Monthly fees

Free checking still exists, and it’s easy to find. Here are three ways to stop paying for a checking account.

  1. Check local banks and credit unions for fee-free checking accounts. Small institutions may have free accounts available, even if you don’t have a high balance.
  2. Learn about waivers at national banks. Banks that charge monthly fees often waive those fees if you meet specific criteria. For example, you might be able to dodge maintenance charges if you set up a direct deposit into your account or keep your account balance above a minimum level.
  3. Go online for free checking. Several online banks offer free checking along with free online bill payment, mobile check deposit, and more. 

With online-only banks, it may be hard to deposit cash or purchase a cashier’s check instantly. Keeping a brick-and-mortar account or planning can prevent most problems.

ATM fees

It never feels good to pay steep fees to get your own money or check your account balance. If you’re a frequent ATM user, you can save a substantial amount of money by eliminating ATM-related fees. Some banks reimburse ATM charges—or a portion of those charges—helping you keep more of your money in your account. Alternatively, open an account at an institution with an ATM network that’s convenient to where you live, work, and travel. If you belong to a credit union, you might already have access to thousands of locations nationwide through shared branching.

You Want Higher Savings Account Interest Rates

If you’re earning near-zero rates in your savings account, it’s worth evaluating alternatives. But low rates alone might not be cause for switching banks. Moving your account only makes sense if you can earn significantly more elsewhere, so run some numbers and decide if it makes sense to take action.

Example: You are mostly satisfied with your bank, but the interest rate seems low. A competing bank pays a rate that’s 0.5% higher than your current bank’s rate. Does it make sense to switch? 

  • If your savings account balance usually hovers around $1,000, that difference of 0.5% results in an extra $5 of interest annually. Switching accounts might not be worth the trouble.
  • If you typically keep $3,000 in savings, the new bank will return an extra $15 per year.
  • With $10,000 in savings, switching banks could yield an additional $50 per year.

Calculate how much additional interest you can earn before you open a new account.

You Want Modern Features

Technology makes it easier than ever to manage your finances, but some banks refuse to evolve. 

Personal financial management (PFM) tools help you track your spending, predict account activity, and work toward your goals. Banks can provide those tools in-house, or they can make your account data accessible to third-party tools (like Mint, Tiller, and others).

Some banks and credit unions prevent you from using third-party tools. If you crave information about your finances, but your bank leaves you wanting, it may be time to switch.

You Want to Simplify

Switching banks can be an opportunity to organize your finances. If you’ve accumulated numerous accounts over the years, or are merging finances with a partner, a new bank account can help. Plus, having everything in one place makes it easy to move money quickly, understand your financial position, and minimize usernames and passwords.

If you find a bank you like, you might decide to use that institution for all of your deposit needs. Look for a bank or credit union with low fees and a competitive lineup of interest-bearing accounts:

If you’re fortunate enough to have a substantial amount in cash, be sure to check FDIC insurance limits (or NCUSIF coverage at credit unions) before consolidating assets.

You Want a Bank You Can Be Proud Of

Whether you keep cash in a savings account or spend with a credit card (and pay it off every month), you create revenue for banks. So why not provide earnings for an organization that’s aligned with your values?

You might feel uneasy about working with a bank that repeatedly misbehaves or has a corporate culture with which you disagree. Plus, you have to wonder how a bank with questionable ethics might be taking advantage of you—perhaps you don’t know about the problem yet. If you’re concerned about your bank, you might do yourself and the world a favor by moving your business elsewhere.

Even when banks treat customers, employees, and other stakeholders fairly, you might prefer small financial institutions over multinational banks. Local banks and credit unions play an important part in your regional economy, helping businesses and property owners while providing services to individuals.

Ready to Change?

If it’s time to switch banks, do it in a way that minimizes headaches during the transition process, and move to a bank that is likely to keep you satisfied over the long term. Select a bank with an excellent reputation, including banks we’ve highlighted, and any local competitors. 

Next, use a checklist to complete the change. Doing so provides a roadmap for each step of the process, helping you avoid fees and problems that waste your time. Once you’re done, congratulate yourself for taking charge of your finances and working with a bank that meets your needs.

Article Sources

  1. American Banker. "'Banks Don't Want to Give Access to Everything': Yodlee Exec." Accessed Dec. 31, 2019.

  2. Federal Reserve Bank of Kansas City. "The Role of Community Banks in the U.S. Economy." Accessed Dec. 31, 2019.