Signs It Is Time to Look for a New Bank

Man dressed in suit, holding his credit card as he screams into his cell phone to his bank, while threatening to close his account
•••

praetorianphoto / Getty Images

If you've experienced less-than-stellar service, pay monthly account fees, or have had other issues with your bank account (like overdraft fees), you may be considering switching banks. Remember, you are not trapped at your bank, and there are always other options available.

Before you decide to switch banks, you need to determine what caused the problem and whether it was your bank’s fault or yours. If the issues you've experienced with your bank are a result of not managing your money properly, then your problems will only follow you to another bank. In that case, it's up to you to change your bad financial habits.

Monthly Service Fees

If you are charged a monthly service fee, you may want to consider changing banks. Before you make the switch, call your bank and see whether it will offer you an account with no monthly service fees. For example, you may have an account with a high minimum-balance requirement that you don't consistently meet, thereby incurring fees. Switching to an account with a lower minimum-balance requirement that waives fees (and that you can meet) will save you money in monthly service fees.

While switching to a new bank account may negate some of your current perks, like free money orders or traveler's checks, ask yourself whether you use these features enough to make paying the monthly fee worth it.

It also may be worthwhile to see whether your bank will waive the account fee if you receive a regular direct deposit in your account. If so, you may want to see whether your employer is willing to offer direct deposit.

You may also be willing to switch banks to qualify for lower interest rates on a mortgage or car loan. This lower interest rate can offer significant savings, and it is worth considering. 

Break the Overdraft Cycle

If you have gotten into a cycle of returned items or being overdrawn, you may want to change banks to start fresh. Keep in mind that this will not solve the problem if you are overspending month after month. You need to become more responsible with money and make it a habit to track your spending while sticking to your monthly budget. However, if a new bank offers overdraft protection, and your current bank does not, it may be worthwhile to switch.

You might consider investing in financial software so that you can track your spending and stick to your budget throughout the month. It's also important to note that your current bank account must be in the black before you can switch banks.

Poor Customer Service

If you want to switch banks because of poor customer service, this is a valid reason to move. Another reason is that there might not be enough locations. Maybe you are moving, and there isn't a branch near your new home.

You also may consider a smaller bank, since they often have better customer service. Credit unions are extremely customer-friendly, as well. You can compare the different accounts and fees online. However, if you have had issues with customer service in the past, you may want to visit your nearest banks to determine whether they would be a good fit for you. 

Shopping for a New Bank

If you decide to open a new account, you should shop around for a bank that will best fit your needs. As you look for a new bank, think about the accounts offered and fees associated with them. Look at branch and ATM locations and bank size.

Think about features that are important to you, such as customer service, overdraft protection, and any special perks that are important to you. For example, if you prefer to do all of your banking online, then a brick-and-mortar bank may not be important to you, and you may consider an online-only bank. You may want perks like free coffee, checks, or no monthly service fees.

How to Switch to a New Bank

If you've decided to switch to a new bank, don't be in a rush, and keep in mind that you don't have to close your old account right away. In fact, it's better to give it a bit of time to stop all activity on your old account and make sure all of your payments have cleared.

While you are waiting, you can begin transferring your direct deposits and automatic withdrawals to your new account. You will have accounts at more than one bank for a short period, but that will make it easier to transfer all of your payments to your new account.

You will need to be sure to switch over all of your monthly transfers, automatic drafts, and direct deposits. When you close your bank account, most banks will allow you to do it in person, in writing, or by phone. Note that some banks will also allow you to close an account online. Check with your bank to be sure what methods are allowable. It can take time, and it is a good idea to have all of your payments and deposits transferred for a while before you close the account.