Buzz
I don’t consider myself a loyal customer to any bank. In the past five or six years, I've changed banks several times due to high fees, poor service, or simply finding a better deal elsewhere. I have no regrets. If you’re contemplating switching your bank, here are some signs it might be time to make the leap.
Fees Are Constantly Rising
When I switched from my major bank years ago, it all started with one fee.
They sent me a notice stating they would begin charging me for my checking account now that I wasn’t a student anymore. Fair enough, I thought, but that was just the beginning. Soon enough, other fees started stacking up. Their overdraft policy, which ended up making news, caused me a lot of trouble. They delayed my direct deposit and processed my largest transactions first, tricking me into paying more than $300 in overdraft fees in one go.
This is a situation that happens quite often. Banks often find ways to introduce hidden fees. For instance:
Increasing the required minimum balance for your account
Charging a fee for returned mail (when you fail to update your address)
Processing large credits first and deposits last, which can push your balance into the negative
The positive side is, if your bank adds any new fees to your account, they are obligated to inform you and provide a new fee schedule. It's also wise to keep some extra funds in your account for a cushion. However, you shouldn’t have to jump through hoops because of a bad bank policy. As a customer, they should be serving your interests, not the other way around.
Online-only banks are gaining popularity. They offer great convenience, and by eliminating overhead costs, they often don’t charge fees, allowing them to provide higher-than-average interest rates and waive ATM fees. In fact, some banks even reward you with incentives just for having an account. Why would I tolerate fees when another bank is ready to offer me perks instead?
I recently switched to Santander Bank, for example, because they offer $10 a month simply for setting up direct deposit. They’ll give you another $10 if you set up two automatic bill payments. Other banks now offer interest on checking accounts as well. While the amounts may be small, and there's fine print involved, the key takeaway is: if your bank keeps slapping fees on you, it's a strong signal that it’s time to make a change.
Local banks, credit unions, and online-only banks are often more inclined to offer free checking. You can use a website like Bankrate to compare bank offerings and fees.
Customer Support Is Unresponsive
Years later, I switched from another bank because their customer service was awful. They were notoriously unhelpful if you encountered any problems with your account. When I had fraudulent charges, they refused to refund the overdraft fees that resulted from those charges, so I made the decision to leave. Of course, once they realized I was closing my account, they suddenly became more willing to waive those fees 'as a courtesy,' but it was far too late by then.
If your bank’s customer service is subpar, there are plenty of other options that are much easier to deal with. The online-only bank I use now (Ally) is quick to respond, friendly, and when I have an issue, they don’t just follow a script and pass me off to someone else—they actually resolve it. Simple is another great online banking alternative.
At the very least, your bank should make it simple to:
Locate their customer service contact information
Be able to reach a representative
Clearly explain your issue
You should also ensure they provide online tools. Most banks offer live chat support and let you keep a record of your conversations with representatives.
Their Online Services Are Lacking
Most banks today are great at offering online services. Ideally, you should be able to do the following either online or through an app:
Pay bills (without extra fees)
Transfer money between accounts and to other banks
Speak with a representative
Request new checks
Deposit checks
A lack of online services doesn’t always reflect poorly on a bank. For instance, credit unions tend to provide great customer service and perks, but because they are smaller, their online offerings might not be as robust. However, if convenience is a priority for you, many banks offer the convenience of avoiding trips to a local branch.
How to Choose a Better Bank
Once you've made the decision to switch, take some time to research and choose a bank for the right reasons. For example, when I switched to Chase, I did so solely for the travel rewards they offered. That was the only factor I looked into. It was a poor choice, and I ended up regretting it later.
There’s more to consider in a bank than just no fees. The first thing you should do is make a list (or even a mental checklist) of what matters most to you. This might include:
Good overdraft protection
Access to free ATMs
Online convenience
Convenient branch locations
Once you know what you want, narrowing down your choices becomes much easier since there are a lot of options available. To start your search, consider using a site like Bankrate, NerdWallet, or My Bank Tracker. When I was researching new banks, I focused on roundup articles that matched what mattered most to me. For example, if free ATM access is your top priority, you can quickly find a list of the best banks offering that benefit and discover something like this.
Ensure They’re FDIC Insured
It’s essential for your bank to be FDIC insured. This guarantees that if the bank fails, your money is protected by the Federal Deposit Insurance Corporation. The FDIC itself states that checking accounts, savings accounts, and Certificates of Deposit (CDs) are typically insured up to the $250,000 legal limit. While your bank is likely covered, you can always check the FDIC website to confirm. Keep in mind that investment accounts aren't FDIC insured, but here we’re focusing on traditional checking and savings accounts.
Pay Attention to Fine Print Regarding Fees
When researching, it's important to examine the fees your potential bank charges. Ensure they don’t have a monthly maintenance fee or require a minimum balance. If they do have such a requirement, make sure you're comfortable with it. Some banks offer bonuses for keeping a certain amount in your account, but if you fall short, they’ll impose a charge. The bonus could be worthwhile. Your bank should also have a straightforward overdraft protection policy, preferably free, where your checking and savings accounts are linked, and overdrafts are covered by drawing from your savings account at no cost.
Look Into Transaction Limits
It’s also important to review your bank’s transaction limits. For example, savings accounts are federally regulated to only allow six ACH transactions per month. However, for anything beyond that, you should be able to freely withdraw, deposit, or transfer funds between your accounts without incurring any charges.
Why You Might Choose a Credit Union
There are many reasons to consider a credit union instead of a bank. The key difference is that credit unions are non-profit organizations, and their customers are also members and owners. Credit unions typically prioritize your best interests when it comes to fees, policies, and loans, unlike larger banks that may not always have your best interests at heart.
Once you’ve selected a bank or credit union, it’s time to make the switch, which can be quite simple with a bit of preparation. Many credit unions, for example, offer “switch kits” to guide you through the transition.
Credit unions are often a great choice if you have a challenging banking history or poor credit, as they tend to be more forgiving with their application process.
What To Do If You’re Denied By a Bank
If you have bad credit, you might not have many banking options. Banks don’t typically use your credit report to decide if they’ll approve you for an account. Instead, they rely on a different report called ChexSystems. My Bank Tracker explains the process like this:
During a standard account application, the bank uses your name and Social Security number to conduct a routine financial check. The first step in this background check is typically reviewing your ChexSystems report. This report reveals any negative banking history, such as outstanding overdrafts or bounced checks. It may also include security alerts or account freezes.
If your banking history is questionable, you may be denied. However, you still have options. You can request your ChexSystems report and dispute any inaccurate items. Alternatively, you could send a letter to the bank requesting reconsideration. A simpler option might be to go with a local bank or credit union that’s more flexible and willing to work with you.
Bank loyalty doesn’t really benefit you. You might believe that your bank is more inclined to help you because you’ve been a long-time customer, but in the end, they simply want to retain customers—whether they’re new or longstanding.
If your bank starts hitting you with hidden fees, neglects your concerns, or generally doesn’t meet your needs, there’s no reason to feel hesitant about making a change, as there are many other choices available.
Image by Nick Criscuolo.
